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Trade, Foreign Direct Investment, and R&D Spillovers

Author

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  • Walid Hejazi

    (University of Toronto at Scarborough)

  • A Edward Safarian

    (University of Toronto)

Abstract

Attempts to measure the spillover effects of multinational enterprises on host countries have generally been cross-sectional and limited to labour productivity in manufacturing for a single country. Recent work in growth theory has measured the extent to which growth in total factor productivity in a country depends not only on domestic R&D capital stocks but also on foreign R&D capital stocks. This paper extends such work by adding foreign direct investment stocks to foreign trade as a channel linking total factor productivity levels between countries. This is done by considering the role of trade and FDI as diffusion channels for G6 R&D to the OECD countries. There are three main results: the coefficient estimates for FDI are higher than those for trade in the standard model; the importance of the trade channel is much reduced once FDI is included; and the overall spillovers increase significantly with the inclusion of FDI.© 1999 JIBS. Journal of International Business Studies (1999) 30, 491–511

Suggested Citation

  • Walid Hejazi & A Edward Safarian, 1999. "Trade, Foreign Direct Investment, and R&D Spillovers," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(3), pages 491-511, September.
  • Handle: RePEc:pal:jintbs:v:30:y:1999:i:3:p:491-511
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