Foreign Direct Investment and International R&D Spillovers in OECD Countries Revisited

Abstract

We test whether foreign direct investment (FDI) is an important channel of international R&D spillovers between OECD countries. The results show that R&D spillovers through inward FDI had considerable positive effects on total factor productivity (TFP) in the 1990s, but not in the 2000s. By contrast, R&D spillovers through outward FDI had positive influence on TFP in the 2000s, but not in the 1990s. The contributions of foreign R&D are more related to FDI flows than to the size of the host countries. Finally, the countries benefiting from the R&D spillovers drastically differ from the countries contributing to the R&D spillovers.