Foreign direct investment and technology spillovers : Theory and evidence

  title={Foreign direct investment and technology spillovers : Theory and evidence},
  author={Zhiqiang Liu},
Within the endogenous growth framework, we offer an explanation on how foreign direct investment (FDI) generates externalities in the form of technology transfer. We distinguish between the level and rate effects of spillovers on the productivity of domestic firms. A new insight gained from the theory is that the level and rate effects of spillovers can go in opposite directions. The negative level effect underscores the fact that technology transfer is a costly process—scarce resources must be… CONTINUE READING
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