Foreign direct investments as an engine of technological change in Malaysia: the role of social interactions

Many developing countries – including Malaysia – try to leverage FDI for local technological change. But our understanding of inter-firm-level processes of technological learning from FDI is still rather limited. This study attempts to shed some light on the role for social interaction in this issue. Based on firm-level survey data, the paper investigates the extent of social relations underpinning backward linkages and analyses the role of social interaction in technological learning from FDI. From a dynamic social learning perspective of technological change FDIs and local firms are conceptualised as members of knowledge networks, comprising FDIs, local buyers/suppliers and other knowledge sources together with their relations. Results suggest that social interactions play a significant role in encouraging technology transfers between foreign firms and their local suppliers, thus contributing to inter-firm knowledge flows.