Using detailed micro data from the Indonesian manufacturing sector, we examine the effect on productivity of direct foreign investment. The results suggest that direct foreign investment benefits locally owned establishments. The effect differs between groups of industries. Spillovers from DFI are found in sectors with a high degree of competition. The result suggests that the degree of competi...

This paper examines the role of spillovers and externalities in influencing the recent siting of foreign-owned R&D activities in European regions. In accordance with the literature on knowledge creation in MNCs, we find that location of foreign-owned research tends to agglomerate, depending upon the potential for the following different sources of spillovers and externalities: (i) intra-industr...

This paper investigates international technology diffusion through trade and patenting in a sample of 48 countries for the period 1980 – 2000. We divide the sample in three income groups to detect different patterns of technology absorption. Our results show that rich countries benefit from domestic technology and foreign technology embodied in imported capital goods, middle-income countries en...

There is substantial empirical evidence that innovation is geographically concentrated. Unlike what is generally assumed, however, it is not clear that localised knowledge spillovers provide a theoretically valid explanation for this. Studying spillovers of cost-reducing technology between Cournot oligopolists we show that 1) localised knowledge spillovers of any level do encourage agglomeratio...

The usual perspective on technology spillovers from FDI sees the MNC subsidiary as a passive actor. It presumes that the technological superiority that spreads from subsidiaries to other firms in the host economy is initially created outside it by MNC parent companies, and is delivered to subsidiaries via international technology transfer. The role of subsidiaries is little more than to act as ...

We study a stochastic dynamic game of process innovation in which firms can initiate and terminate R&D efforts and production at different times. We discern the impact of knowledge spillovers on the investments in existing markets, as well as on the likely structure of newly forming markets, for all possible asymmetries between firms. While an increase in spillovers may improve the likelihood o...

This paper examines whether UK firms that locate their R&D activity in the USA benefit more than other UK firms from knowledge spillovers originating from US R&D. Patent data provides a firm-level measure of the location of innovative activity, which enables the identification of knowledge spillovers associated with "technology sourcing". Our identification strategy helps to address various pro...

This study distinguishes multinational firm (MNE) technology-spillover from learning effects. Whenever learning takes time, the model predicts that foreign investors deduct the economic value of learning from wages of inexperienced workers and add it to experienced ones to prevent them from moving to local competitors. Hence, the national wage bill is unaffected by the presence of MNEs. In cont...

Within the endogenous growth framework, we offer an explanation on how foreign direct investment (FDI) generates externalities in the form of technology transfer. We distinguish between the level and rate effects of spillovers on the productivity of domestic firms. A new insight gained from the theory is that the level and rate effects of spillovers can go in opposite directions. The negative l...