Multinational Corporations, Foreign Investment, and Royalties and License Fees: Effects on Host-Country Total Factor Productivity

Argentino Pessoa

Notas Económicas, 2008, issue 28, 6-31

Abstract: In this paper we examine the relationship between inward FDI and total factor productivity (TFP) in a framework motivated by the OLI paradigm. A panel data approach is used to study the effects of FDI and payments of royalties and license fees (R&L) on aggregate TFP in a sample of 16 OECD countries, between 1985 and 2002. Our empirical tests show that FDI and R&L have a positive impact on host-country TFP, and also suggest that the amount of positive effects of FDI and R&L is dependent on the level of development of the receiving country. Additionally, our data show that, when other factors remain constant, inward FDI and R&L payments are substitutes in positively influencing TFP of the host country.

JEL-codes: C33 F21 F23 F43 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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