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Exploring the impact of national system of innovation on the outcomes of foreign direct investment

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  • Angathevar Baskaran
  • Mammo Muchie

Abstract

This paper attempts to explore the possible relationship between the characteristics of a National System of Innovation (NSI) and their impact on Foreign Direct Investment (FDI) outcomes, particularly in developing countries. We employ a heuristic NSI-FDI conceptual framework linking the robustness of NSI to the benefits or lack of it from FDI. We create a taxonomy of NSIs as well-functioning/strong, relatively well-functioning and weak and try to empirically find out how each NSI type is related to the corresponding FDI outcomes. We examine whether a strong NSI can bring a high-end benefit from FDI, whether those with a weak NSI are at the low end of the FDI potential benefit spectrum, and whether a relatively well-functioning NSI is linked to medium or average FDI outcomes. We used descriptive data from selected developing economies – China, India, South Africa, Ghana, Ethiopia, Tanzania and Zambia – and applied this conceptual framework. Despite some data limitations, our case studies show that the characteristics and robustness (or lack of robustness) of NSI can impact on how FDI flows to a country and the kinds of outcomes it will produce, other things being equal. Therefore, how countries build their NSI matters significantly to national policy making.

Suggested Citation

  • Angathevar Baskaran & Mammo Muchie, 2009. "Exploring the impact of national system of innovation on the outcomes of foreign direct investment," International Journal of Technological Learning, Innovation and Development, Inderscience Enterprises Ltd, vol. 2(4), pages 314-345.
  • Handle: RePEc:ids:ijtlid:v:2:y:2009:i:4:p:314-345
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    Cited by:

    1. Francesco Bogliacino & Mario Pianta, 2016. "The Pavitt Taxonomy, revisited: patterns of innovation in manufacturing and services," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 153-180, August.
    2. Na-Allah, Abdelrasaq & Muchie, Mammo, 2012. "Social absorption capability, systems of innovation and manufactured export response to preferential trade incentives," Research Policy, Elsevier, vol. 41(1), pages 93-101.

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