Abstract
Many economists consider foreign direct investment (FDI) an important channel for the transfer of technology to emerging markets. This study investigates the impact of inward FDI on absorptive capacity and domestic innovation capability in South Asian countries from 2000 to 2011. The experiences of the given sample support the hypothesis that domestic innovation capability stems from a knowledge-generation process with well-equipped human resources like scientists, engineers, technicians, research equipment, and cumulative research and development (R&D) expenditure. In addition, the study found that local R&D expenditure is a very significant determinant of innovation capability. This inquiry into innovation in South Asian countries contributes to the portfolio of developing economies literature and has practical implications for those concerned with international technology spillovers in South Asian countries. ©2014 Wiley Periodicals, Inc.
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