Foreign Direct Investment and Localized Technological Spillovers

It has been empirically shown that firms invest in foreign countries with the aim to absorb technological knowledge. However, the recent literature on technological innovation and foreign expansion has not fully taken into account these features of foreign direct investment. Introducing this new element into the analysis implies assuming that multinationals and exporters operate with different degrees of technological spillovers. Our aim is to study how these differences in the transmission of knowledge may affect the firms’ incentive to innovate and their behaviour in an international market, that is their choice between serving foreign markets via exports or foreign investments.