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The role of technology as an absorptive capacity in economic growth in emerging economies: A new approach

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  • Kotey, Richard Angelous
  • Abor, Joshua Yindenaba

Abstract

Studies have shown that the effects of Foreign Direct Investment (FDI) on economic growth have not always been direct, especially in developing regions; certain characteristics must exist in the economy for the effects of FDI to be well absorbed. Therefore, this study sought to assess the economic impact of FDI on economic growth in Sub-Saharan African (SSA) countries, factoring in technology as an absorptive capacity. Because of the scarcity of data on a viable proxy for technology in the African context, we measure technology in a novel approach, using annual number of published innovation-related papers as a proxy for technological presence. Data from forty-three Sub-Saharan countries over a 19-year period (from 1990 to 2008) was analyzed. Using a Fixed Effects (FE) regression model, the study found that FDI had a negative and significant effect on GDP, which is our proxy for economic growth. However, when FDI is interacted with technology, the relationship turns positive and significant. This implies that countries with technological presence are more able to absorb from FDI than those with little technology. Furthermore, the study found that countries with high technology were able to absorb more from FDI than those with low technology.

Suggested Citation

  • Kotey, Richard Angelous & Abor, Joshua Yindenaba, 2019. "The role of technology as an absorptive capacity in economic growth in emerging economies: A new approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 16(2), pages 59-78.
    • Handle: RePEc:zbw:espost:215861
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    File URL: https://www.econstor.eu/bitstream/10419/215861/1/THE%20ROLE%20OF%20TECHNOLOGY%20AS%20AN%20ABSORPTIVE%20CAPACITY%20ON%20ECONOMIC.pdf
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    Citations

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    Cited by:

    1. Ronald Ebenezer Essel, 2023. "Foreign direct investment, technological spillover, and total factor productivity growth in Ghana," SN Business & Economics, Springer, vol. 3(8), pages 1-34, August.
    2. Rafael Lizarralde & Jaione Ganzarain & Mikel Zubizarreta, 2020. "Assessment and Selection of Technologies for the Sustainable Development of an R&D Center," Sustainability, MDPI, vol. 12(23), pages 1-23, December.

    More about this item

    Keywords

    Foreign Direct Investment; Technology; Innovation; Absorptive Capacity;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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