FDI and Reverse Technology Spillovers

MNEs own, produce, and control most of world's advanced production technologies and are therefore responsible for a major part of the world's research and development (R&D) efforts. Owing to the public good characteristics, these technologies tend to spill over to domestic firms and thereby affecting the economic activities of the host country. Optimism about the technology spillovers is in fact the driving force, inter alia, led to a wide ranging changes in national policies on FDI since 1990s (Blomstrom and Kokko, 2003) . Studies are, however, focused mostly on unconditional technology spillovers from FDI. That is, the incidence of technology spillovers is not conditional upon any factor. But there are some factors, for example characteristics of domestic and foreign firm, which act as essential conditions for the occurrence of technology spillover from FDI. Keeping the above considerations in mind, it can stated that technology spillovers are not spontaneous from presence of foreign firms in the host country. The aim of my study is to understand how the in-house technology differences among domestic firms affect the technology spillovers from FDI.