Discussion Paper Details

Please find the details for DP10757 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Do Foreign Investment and Trade Spur Innovation?

Author(s): Yuriy Gorodnichenko, Jan Svejnar and Katherine Terrell

Publication Date: August 2015

Keyword(s): emerging markets, FDI, foreign competition, horizontal and vertical linkages, innovation and spillovers

Programme Area(s): Industrial Organization, Labour Economics and Macroeconomics and Growth

Abstract: Using large firm-level and industry-level data sets from eighteen countries, we find that foreign direct investment (FDI) and trade have positive spillover effects on product and technology innovation by domestic firms in emerging markets. The FDI effect is more pronounced for firms from advanced economies. However, while we detect the spillover effects with micro data at the firm-level, when we use linkage variables computed from input-output tables at the industry level we find much weaker, and usually insignificant, effects. These patterns are important for policy, suggesting that spillovers are localized to firms engaged directly with multinationals and in trade, rather than affecting all domestic firms in industries with FDI presence.

For full details and related downloads, please visit:

Bibliographic Reference

Gorodnichenko, Y, Svejnar, J and Terrell, K. 2015. 'Do Foreign Investment and Trade Spur Innovation?'. London, Centre for Economic Policy Research.