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...

We investigate empirically whether foreign direct investment generates externalities in the form of technology transfer. Using data on 29 manufacturing industries over the period from 1993 to 1998 in the Shenzhen Special Economic Zone of China, we find that foreign direct investment has large...