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Technology Spillover and Absorptive Capacity of Firms and Countries

Author

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  • Shujiro Urata

    (Waseda University, Japan)

  • Youngmin Baek

    (Tokyo Metropolitan University, Japan)

Abstract

The paper examines the foreign direct investment (FDI) spillover effects in developing countries and investigates the importance of the absorptive capacity of a firm and a country in realizing and facilitating FDI spillover. It uses data obtained from the World Bank’s Enterprise Surveys for 107 countries from 2007 to 2020. The study finds that firms in developing countries do not benefit from horizontal FDI but benefit from forward and backward vertical FDI. The study also finds that firms can benefit from horizontal, forward, and backward FDI by improving the absorptive capacity of firms and host countries. Based on these findings, several recommendations are presented to help firms benefit from FDI spillover.

Suggested Citation

  • Shujiro Urata & Youngmin Baek, 2025. "Technology Spillover and Absorptive Capacity of Firms and Countries," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 50(3), pages 1-24, September.
    • Handle: RePEc:ris:jecdev:021627
    DOI: 10.35866/caujed.2025.50.3.001
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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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