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Foreign firms and the diffusion of knowledge

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  • Alexander Monge-Naranjo

Abstract

This paper constructs a model to examine the impact of foreign firms on a developing Country?s own accumulation of entrepreneurial knowledge. In the model, entrepreneurial skills are built up on the basis of productive ideas that diffuse internally (at the inside of firms) and externally (spillovers.) Openness to foreign firms enhances the aggregate exposure to ideas but also reduces the returns to investing in entrepreneurial skills. When externalities are present, openness can be welfare reducing. However, regardless of the relative importance of externalities, simple quantitative exercises suggest that the gains of openness are positive and can be large.

Suggested Citation

  • Alexander Monge-Naranjo, 2012. "Foreign firms and the diffusion of knowledge," Working Papers 2012-055, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:2012-055
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    Cited by:

    1. Janczewska Danuta, 2016. "Process of Knowledge Diffusion in SMEs in Multicultural Space," Journal of Intercultural Management, Sciendo, vol. 8(2), pages 85-104, June.
    2. Sampson, Thomas, 2013. "Brain drain or brain gain? Technology diffusion and learning on-the-job," Journal of International Economics, Elsevier, vol. 90(1), pages 162-176.
    3. Manuel García-Santana, 2013. "Foreign Firms, Distribution of Income, and the Welfare of Developing Countries," 2013 Meeting Papers 1044, Society for Economic Dynamics.
    4. Kirker, Michael, 2019. "Learning Through Hiring: Knowledge From New Workers as an Explanation of Endogenous Growth," MPRA Paper 94505, University Library of Munich, Germany.

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    International business enterprises; Technology - Economic aspects;

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