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Multinational Corporations, Foreign Investment, and Royalties and License Fees: Effects on Host-Country Total Factor Productivity

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  • Argentino Pessoa

    (Faculdade de Economia do Porto)

Abstract

In this paper we examine the relationship between inward FDI and total factor productivity (TFP) in a framework motivated by the OLI paradigm. A panel data approach is used to study the effects of FDI and payments of royalties and license fees (R&L) on aggregate TFP in a sample of 16 OECD countries, between 1985 and 2002. Our empirical tests show that FDI and R&L have a positive impact on host-country TFP, and also suggest that the amount of positive effects of FDI and R&L is dependent on the level of development of the receiving country. Additionally, our data show that, when other factors remain constant, inward FDI and R&L payments are substitutes in positively influencing TFP of the host country.

Suggested Citation

  • Argentino Pessoa, 2008. "Multinational Corporations, Foreign Investment, and Royalties and License Fees: Effects on Host-Country Total Factor Productivity," Notas Económicas, Faculty of Economics, University of Coimbra, issue 28, pages 6-31, December.
    • Handle: RePEc:gmf:journl:y:2008:i:28:p:6-31
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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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