Knowledge Diffusion Through FDI: Worldwide Firm-Level Evidence

Knowledge Diffusion Through FDI: Worldwide Firm-Level Evidence
READ MORE...
Volume/Issue: Volume 2024 Issue 152
Publication date: July 2024
ISBN: 9798400280757
$20.00
Add to Cart by clicking price of the language and format you'd like to purchase
Available Languages and Formats
paperback else
pdf else
epub else
English
Prices in red indicate formats that are not yet available but are forthcoming.
Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Exports and Imports , Economics- Macroeconomics , Greenfield FDI , Brownfield FDI , cross-border M&A , Inward FDI , Outward FDI , Knowledge spillover , Patent citation , LP-DiD , investing firm , FDI activity , FDI measure , impacts of FDI , Foreign direct investment , Spillovers , Absorptive capacity , Stocks , Global

Summary

This paper examines the impact of Foreign Direct Investment (FDI) on knowledge diffusion by analyzing the effect of firm-level FDI activities on cross-border patent citations. We construct a novel firm-level panel dataset that combines worldwide utility patent and citations data with project-level greenfield FDI and crossborder mergers and acquisitions (M&A) data over the past two decades, covering firms across 60 countries. Applying a new local projection difference-indifferences methodology, our analysis reveals that FDI significantly enhances knowledge flows both from and to the investing firms. Citation flows between investing firms and host countries increase by up to around 10.6% to 13% in five years after the initial investment. These effects are stronger when host countries have higher innovation capacities or are technologically more similar to the investing firm. We also uncover knowledge spillovers beyond targeted firms and industries in host countries, which are particularly more pronounced for sectors closely connected in the technology space.