Assessing the roles that absorptive capacity and economic distance play in the foreign direct investment-productivity growth nexus

Philip Bodman, Thanh Le

    Research output: Contribution to journalArticle

    30 Citations (Scopus)

    Abstract

    We further examine the channels through which Foreign Direct Investment (FDI) develops the national productivity of host countries. We investigate whether FDI is an effective channel of technological transfer across borders and whether that technology transfer is bi-directional: from an investing country to a host country and vice versa. In particular, an analysis is provided of whether FDI helps channel more resources towards the promotion of education activities and hence augments economic growth indirectly through augmenting the host country's absorptive capacity. Also, the analysis uses a novel approach to take into account the possibility that physical distances can act as a barrier to economic and technological interactions amongst countries, by embedding a measure of geographical distance into two specific channels: international trade and FDI. Empirical results obtained all lend strong support to these hypotheses.

    Original languageEnglish
    Pages (from-to)1027-1039
    Number of pages13
    JournalApplied Economics
    Volume45
    Issue number8
    DOIs
    Publication statusPublished - Mar 2013

    Keywords

    • Absorptive capacity
    • FDI
    • Human capital
    • International spillovers
    • Productivity
    • R&D
    • Trade

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