Technology transfer in Vietnam's provinces: Insights from a product variety growth model

This study proposes an endogenous growth model to demonstrate the benefit of FDI inflows and their related technology transfers on economic growth and then conducts empirical studies via growth regression by focusing on provincial-level data of Vietnam. The model explains how FDI inflows enhance the technological level of the host country. The effect of FDI inflows is expected to yield economic growth in the long run via technology transfer. The role of domestic firms also is illustrated in the theoretical model, which aims to produce intermediate goods for MNCs. These intermediate goods producers benefit when they collaborate with the MNCs. For robust consideration, this study uses four methodologies to build the empirical models: Pool OLS, Pool 2SLS, RE-GLS, and system GMM. The results illustrate the significant effect of FDI and other macroeconomic variables in the provinces of Vietnam. Using the provincial level data of Vietnam, this study provides evidence for the spillover effect of FDI inflows to the local technology level in the theoretical model. The Vietnamese policymakers can base our empirical results on building necessary policies. The policy which supports the MNCs with high-tech investment or the intermediate goods producers can be considered.