Abstract
Foreign direct investment (FDI) is assumed to be a source of knowledge flows across National Innovation Systems, with particular relevance for developing countries. Nonetheless, empirical assessments are usually manufacturing-oriented, providing only a partial view of the phenomena under scrutiny. This article aims at contributing to this body of literature by investigating the impacts of inward FDI on aggregate outcomes of developing countries' National Innovation Systems, taking into account potential contributions from Knowledge-Intensive Business-Services (KIBS) multinationals and their respective comparison with manufacturing investments. Using a panel dataset comprising 38 developing countries (2001-2010), fixed-effects regressions are applied according to a traditional endogenous growth model. Empirical findings underscore the relevance of KIBS MNCs' contributions to host innovation systems in developing countries. These impacts broadly surmount those of manufacturing FDI and they are particularly significant for: (a) value added in services; (b) value added in manufacturing; (c) aggregate export capacity; and (d) international (United States Patent and Trademark Office[USPTO]) patenting activity.
Highlights
The usual assumption supporting the role played by multinational corporations (MNCs) in accelerating the pace of innovation and technological change is that host nations can benefit from foreign direct investments (FDI) through the generation and diffusion of technological and knowledge spillovers (Alfaro, Chanda, Kalemli-Ozcan, & Sayek, 2004)
Aiming at developing a comprehensive view of the impacts of Knowledge-Intensive Business Services (KIBS)’ inward FDI on developing countries’ National Innovation Systems (NISs), the approach used in this research builds upon a more flexible perspective of economic output. This allows an investigation of FDI effects on: (a) Intellectual property generation: trademark applications at the national level; patents filed at the United States Patent and Trademark Office (USPTO); (b) Intellectual property revenues: international flows of royalty receipts; (c) Productivity: value added in manufacturing and service industries; labor productivity; and (d) Trade capabilities: overall export flows; export flows in high-technology (R&D intensive) industries
It is interesting to verify that KIBS contributions to value added in manufacturing industries is positive and significant, while these effects do not hold for FDIMAN
Summary
The usual assumption supporting the role played by multinational corporations (MNCs) in accelerating the pace of innovation and technological change is that host nations can benefit from foreign direct investments (FDI) through the generation and diffusion of technological and knowledge spillovers (Alfaro, Chanda, Kalemli-Ozcan, & Sayek, 2004). Most analytical frameworks are grounded on suppositions and data oriented towards manufacturing sectors (Ramasamy & Yeung, 2010), meaning that conclusions on the importance of multinationals to host markets are strongly related to statistical models and case studies focused on manufacturing agents Important, such analyses often ignore data and phenomena involving service industries, especially for countries that lie outside the group of developed nations (Massini & Miozzo, 2012). KIBS represent a core feature of knowledge-based economies, since they leverage systemic capabilities by promoting the generation of innovative networks between agents, as well as contributing to produce, diffuse, supply and absorb knowledge across industries (He & Wong, 2009; Miles, 2004; Simmie & Strambach, 2006) These idiosyncrasies lead us to question what are the effective impacts of KIBS’ FDI on the output dynamics of developing countries’ innovation systems? These idiosyncrasies lead us to question what are the effective impacts of KIBS’ FDI on the output dynamics of developing countries’ innovation systems? And how do they compare with potential contributions related to manufacturing FDI?
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