The Role of Foreign Direct Investments on Small Countries' Competitive and Technological Position

This KNOGG report analyses the role of Transnational Corporations in the small European countries and synthesises their importance in generating spillovers. For dissemination of technology it is important to build and/or increase the efficiency of national innovation systems and strengthen the technological advantages of local firms to enable them to absorb successfully R&D from foreign TNCs. The location is of importance for TNCs that concentrate more on development than on research activities. Finland is the only one of the KNOGG countries that actively promotes S&T policies by enforcing the domestic national innovation system. This makes the country an attractive place for high technology parts of inward FDI. Although Ireland, the Netherlands and Hungary also try to attract FDI with connections to their domestic economy, there are often not linkages to the national innovation system. In Greece and Slovenia some fiscal measures of technology spillovers exist but these are not part of explicit S&T policies.