Country-of-origin effects on technology transfer in foreign direct investment

• Published in: The journal of international trade & economic development 2024-10, Vol.33 (7), p.1345-1370
• Main Authors: Chan, Sok-Gee, Har, Wai-Mun, Kanapathy, Kanagi, Celik, Saban, Aktan, Bora
• Format: Article
• Language: English
• Subjects: country-of-origin; Developing countries; Foreign direct investment; Foreign investment; Generalized method of moments; Investment policy; LDCs; quantile analysis; Rule of origin; Technology transfer
• ISSN: 0963-8199; 1469-9559
• DOI: 10.1080/09638199.2023.2262615

This study investigates the role of foreign direct investment (FDI) and its country-of-origin in technology transfer. Using data of 95 countries from 2008 to 2019, results indicate that net inflows of the FDI are positively related to technological transfer especially in developing countries. This is consistent with the findings that show fewer resources endowed countries benefited from advanced technologies and management know-how. Furthermore, results suggest different country-of-origin affects the technology transfer of the host economy differently. These results are consistent with studies that suggest the FDI origins are crucial to expose firms with variety of technologies and management practices. Results from quantile analysis prove that there is an existence of a threshold for the developed and developing countries to gain from the country-of-origin of the FDI. Therefore, we need to relook at the investment policies of the host countries to maximize the benefits from different sources of FDI.