R&D and Technology Spillovers through FDI: Innovation and Absorptive Capacity

This Paper examines the effects of two faces of R&D (innovation and development of absorptive or learning capacity) and technology spillovers from FDI (foreign direct investment) on a firm’s productivity growth. Using firm-level panel data on Czech manufacturing firms between 1995 and 1998, I find that: 1) The learning effect of R&D is more important than the innovative effect of R&D in explaining the productivity growth of a firm 2) Technology spillovers from FDI occur for firms that are more R&D intensive 3) Spillovers from foreign joint ventures are insignificant for Czech manufacturing firms 4) The extent of technology spillovers is greater in oligopolistic sectors (electrical machinery and radio and television) than in non-oligopolistic sectors (food, non-metallic minerals, and other manufacturing).