Foreign direct investment and total factor productivity growth: does distance from technology frontier matter?
by Subaran Roy
Global Business and Economics Review (GBER), Vol. 18, No. 2, 2016

Abstract: We investigate the effects of the important channel of technology diffusion namely foreign direct investment (FDI) on the total factor productivity (TFP) growth. We contribute to the literature by empirically investigating the role of initial distance of a country from the technology frontier in determining the net effect of FDI on TFP growth. In this study, we find that the net effect of FDI on TFP growth decreases with the increase in distance. In order to take this research a step further, we implement the threshold regression technique to explore the nonlinearity associated with FDI. Our findings suggest that if initial distance of a country exceeds a threshold level then the leader will have a locomotive effect and can pull the followers along, while in the other situation there is a significant negative impact of FDI that increases with distance as a result of which the net benefit from FDI can be miniscule.

Online publication date: Mon, 28-Mar-2016

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the Global Business and Economics Review (GBER):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com