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Technology Spillovers: A Motive for Foreign Direct Investment?

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  • Leo A. Grünfeld

Abstract

This paper explores the relationship between the R&D activity in a country and the inflow of foreign capital through foreign direct investment and foreign ownership. The idea that firms invest abroad in order to more easily absorb the knowledge and technology of foreign firms is tested empirically using a unique firm level data set covering foreign ownership and R&D in all Norwegian manufacturing firms over the period 1990 to 1996. The study gives no clear support for such a motive behind foreign ownership. On the contrary, the econometric study indicates that foreign investors predominantly try to exploit their technological advantages in the Norwegian market. The results also show that the presence of foreign ownership is more volatile in highly R&D intensive firms. We claim that this is due to the fact that large R&D investment often result in large losses as well as gains, which again attracts or repels foreign owner interests.

Suggested Citation

  • Leo A. Grünfeld, 2001. "Technology Spillovers: A Motive for Foreign Direct Investment?," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 27, pages 97-120.
    • Handle: RePEc:noj:journl:v:27:y:2001:p:97-120
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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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