IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Foreign Direct Investment and Technology Transfers to Local Suppliers: Identifying the effects of type of ownership and the technology gap

Listed author(s):
  • Jacob A. Jordaan


In this paper, I present novel empirical evidence in support of the idea that FDI firms can act as an important driver of regional growth, by acting as a source of new knowledge and technologies to local suppliers in a host economy. For the analysis, I use unique firm level data that I obtained from applying several purpose built surveys among FDI and domestic producer firms as well as local suppliers in the regional economy of Nuevo Leon, Mexico. With this data, I assess the scale and nature of technology transfers between FDI firms and local suppliers and I identify statistically factors that influence the spillover impact that arises from these transfers. The main findings are three ]fold. Firsts, I find clear and robust evidence that FDI firms are significantly more involved than domestic producer firms in various knowledge transfer activities, activities with a direct positive impact on production processes of the local suppliers. As a result, suppliers of FDI firms are more likely to experience large positive technological improvements. Second, the analysis shows that a large technology gap between FDI and local suppliers fosters rather than hinders this positive impact among local suppliers of material inputs. This effect persists even when I control for both the level and nature of support that FDI firms provide, suggesting that in particular local suppliers that have a large potential to improve can benefit from their business dealings with FDI firms. Third, I also find that several indicators of the level of absorptive capacity of local suppliers are positively associated with the technology impact that FDI firms create, indicating that there is scope for local policymaking to enhance the positive impact that foreign ]owned firms generate in their local host economy. Key Words: FDI, Local Suppliers, Regional Growth, Technology Transfers, Technology Gap, Absorptive Capacity JEL Classification: C21, F23, O18, O33

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa12p1166.

in new window

Date of creation: Oct 2012
Handle: RePEc:wiw:wiwrsa:ersa12p1166
Contact details of provider: Postal:
Welthandelsplatz 1, 1020 Vienna, Austria

Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. Aitken, Brian & Harrison, Ann & Lipsey, Robert E., 1996. "Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States," Journal of International Economics, Elsevier, vol. 40(3-4), pages 345-371, May.
  2. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa12p1166. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.