MNEs, FDI and regional innovation intensity: evidence from Brazil

Abstract

Foreign direct investment (FDI) has been seen by the literature as an influential factor in the technological evolution of host countries' innovation ecosystems, where several developing nations, such as Brazil, aim to attract FDI to potentialize their development through innovative output. However, the evidence on whether FDI configures a source of positive or negative influence on regional innovation capabilities is mixed. Furthermore, despite the existence of studies regarding emerging economies, there is a gap when it comes to the regional level in Brazil. We intend to contribute to the literature by examining whether multinational enterprises (MNEs) induce high or low-intensity innovations regionally in this last context. Thus, this study aims to complement academic investigations by analyzing the influence of MNEs on regional innovation intensity in Brazil in the state of São Paulo using a unique regional-level FDI database in a panel ranging from 2010 to 2016. FDI and AC demonstrated a positive effect on high-intensity innovation, specifically invention patents, with no observable influence on low-intensity innovation, such as utility models and certificates of addition. These findings corroborate various regression specifications and alternative estimation methods explored throughout the academic literature.