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Linked in by foreign direct investment: The role of firm-level relationships in knowledge transfers in Africa and Asia

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Listed:
  • Carol Newman
  • John Page
  • John Rand
  • Abebe Shimeles
  • Måns Söderbom
  • Finn Tarp

Abstract

This study combines evidence from interviews in seven countries with (i) government institutions responsible for attracting foreign direct investment (FDI), (ii) 102 multinational enterprises (MNEs), and (iii) 226 domestic firms linked to these foreign affiliates as suppliers, customers, or competitors. The purpose of the interviews was to identify whether relations between MNEs and domestic firms lead to direct transfers of knowledge/technology. We first document that there are relatively few linkages between MNEs and domestic firms in sub-Saharan Africa compared with Asia. However, when linkages are present in sub-Saharan Africa, they raise the likelihood of direct knowledge/technology transfers from MNEs to domestic firms as compared with linked-in firms in Asia. Finally, we do not find that direct knowledge/technology transfers are more likely to occur via FDI than through trade. As such, our results are not consistent with the view that tacit knowledge transfers are more likely to occur through localized linkages.

Suggested Citation

  • Carol Newman & John Page & John Rand & Abebe Shimeles & Måns Söderbom & Finn Tarp, 2018. "Linked in by foreign direct investment: The role of firm-level relationships in knowledge transfers in Africa and Asia," WIDER Working Paper Series 161, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:wp2018-161
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    References listed on IDEAS

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