Technology Transfer through Backward Linkages : The Case of the Spanish Manufacturing Industry
The aim of this paper is to examine technology transfer through backward linkages between multinational enterprises and local suppliers. This issue is of great interest for several reasons. First of all, the new theory of economic growth suggests that technological innovations are becoming an increasingly important contributor to economic growth. Secondly, an obvious policy issue for governments is whether or not incentives should be offered to multinational firms in order to attract them. The econometric analysis presented here is based on a firm level database from Spain for the period 1990-2000. We use the Olley and Pakes method to estimate the total factor productivity of the firms and measure the effect of downstream FDI on local firm productivity and find positive evidence on the existence of technology transfer through backward linkages. Our results show strong evidence on technology spillovers through backward linkages, especially in the case of export-oriented affiliates and fully-owned affiliates.
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