Vertical Versus Horizontal Foreign Direct Investment and Technology Spillovers

Abstract

Foreign direct investment (FDI) and international trade are two major channels of international diffusion of technological knowledge (Keller 2004,2010). While a number of empirical studies confirm significant spillover effects of knowledge through imports, the empirical findings on technology spillover effects through FDI are conflicting. In particular, there is relatively little evidence of spillovers of knowledge from inward FDI to the host country’s firms in the same industry. For example, Haskel et al. (2007) examine the situation in the United Kingdom and find significantly positive productivity spillovers from FDI.