A large number of countries have enacted laws aimed at making it easier for firmscto invest in their country, while many countries offer various monetary incentives and tax
incentives to encourage inward Foreign Direct Investment (FDI). The desire to attract FDI is due not only to the fact that FDI brings in new investment boosting national income and
employment, but also due to the expectation that inward FDI would also provide additional spillover benefits to the local economy that can result in higher productivity growth and
increased export growth. This study aims to examine the impact of foreign direct investment on innovation in developing countries. The estimation of a panel threshold model on a sample of 54 developing countries for the 1980-2009 period shows the presence of non linear effects in the relationship between FDI and innovation. We find a threshold value of technological development below which FDI has a negative impact on innovation and above
which FDI has a significant positive impact on innovation. We conclude that it is not enough for economic policy to attract foreign investments, it is still necessary to support domestic
firms to build an absorptive capacity allowing them to enjoy the benefits of multinational firms.
Real Time Impact Factor:
Pending
Author Name: Kamilia Loukil
URL: View PDF
Keywords: foreign direct investment; innovation; absorptive capacity; non linear relationship
ISSN: 2501-1596
EISSN: 2501-3599
EOI/DOI:
Add Citation
Views: 1