Foreign Technology Transfer, R&D and Innovation: Resolving the Technology–Productivity Conundrum

Abstract

This study aims to empirically investigate the impact of foreign technology transfer and R&D on total factor productivity and labour productivity of Indian firms. The results of production function analysis indicate that foreign technology plays a significant role in output growth. The results of growth the accounting approach also suggest a critical role of foreign technology in the productivity growth of firms. Interestingly, our findings indicate that while R&D does not significantly contribute to productivity growth, it shares a complementary relationship with foreign technology and drives a firm’s productivity. Our findings indicate that firms that engage in R&D and foreign technology transfer have a competitive edge in terms of productivity and output, but the role of R&D intensity cannot be established.