Inward foreign direct investment and national innovative capacity

Abstract

There is a strong debate whether a country’s national innovative capacity (NIC) is entirely determined by local effects or it is also influenced by a global network position and international economic activities. The subject of the research is the impact of inward foreign direct investment (IFDI) on NIC. The main aim of this paper is twofold: to focus on IFDI as an input, and engage non-technological innovation as an output in NIC models. In order to reach this aim, a review of scientific literature as well as correlation and regression analyses were used. An investigation of 28 European Union (EU) Member States in the period of 2013-2016 shows that the EU has a great intellectual capacity of human capital which drives both technological and non-technological innovation. Furthermore, it was found out that IFDI and import boost the employment in knowledge-intensive sectors and positively affect the number of trademark and design applications. Nevertheless, despite the efforts to include marketing and organisation innovation as non-technological innovative output, no relationship with the international economic activities (i.e. imports and IFDI) was detected. These findings thus could help to improve national innovation policies and facilitate EU efforts to catch up with the strongest innovators in the World.