PhD-Project: FDI and innovation dynamics in developing countries
Ignacio Silva Neira
Supervisors: Dr. Carlos Rodríguez, University of the Basque Country; Prof. Dr. Jennifer Pédussel Wu, Berlin School of Economics and Law
About
Currently, the concept of globalization is controversial and heterogeneous. In the economic sciences, the process of globalization is commonly understood as the movement of international factors such as capital, workers, and traded items. Certainly, these three values are substantially higher than in the middle of the 20th century, and most of the developing countries have oriented their development strategies taking into consideration the new international context (Lall, 1994; O´Brien & Williams, 2020). Foreign Direct Investment (FDI) has been particularly relevant for developing countries, especially for those who after the Washington Consensus have promoted the attraction of FDI, not only to increase the capital endowment, but also to bring new technology, increase productivity, and foster income catching up (Lall, 1994).
The success of this process is highly controversial. Some authors stress that is not possible to incorporate foreign knowledge due to the nature of the learning process (Nelson, 2004). Knowledge is location and time specific, and the possibility of positive spillovers from FDI depends on the local economic structure and institutions. Although there is an abundant literature on FDI productivity spillovers, with unclear results, there is limited evidence on how FDI interacts with the local innovation process (Fu, Pietrobelli, & Soete, 2011).
This Ph.D. project aims to fill this gap incorporating an integrated approach between the FDI literature and an evolutionary perspective on the innovation process. A combined microeconomic and macroeconomic approach will contribute to understand the uncovered links between the firm level dynamics and the macro and institutional conditions. The research question pursued in this project is the following: does FDI crowd out local innovation? A deeper understanding of this question leads to the following subsequent questions: What responses generate in local firms following an increase in foreign competition? How do differences in national innovation systems determine the absorption of foreign technology and the promotion of innovation? How does FDI contribute to long-term productivity?
This discussion and research can promote important policy recommendation for developing economies. The challenge of developing long-term goals required in the promotion of a broad understanding of capability creation incorporates a multivariate relation between foreign knowledge, local institutional frameworks, and economic conditions. An integration and coordination between the national innovation system and the policies that aim to attract FDI might be a necessary condition to promote a long-term convergence process.
Literature
Fu, X., Pietrobelli, C., & Soete, L. (2011). The role of foreign technology and indigenous innovation in the emerging economies: technological change and catching-up. World development, 39(7), 1204-1212.
Lall, S. (1994). Industrial Policy: The Role of Government in Promoting Industrial and Technological Development. UNCTAD review.
Nelson, R. (2004). The challenge of building an effective innovation system for catch-up. Oxford development studies, 32(3), 365-374.
O'brien, R., & Williams, M. (2020). Global political economy: Evolution and dynamics. Bloomsbury Publishing.