Multinational strategy, institutions and spillovers: the role of institutions in knowledge spillovers in emerging markets

Sumon Bhaumik (), Nigel Driffield (), Katiuscia Lavoratori (), Meng Song () and Priit Vahter ()
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Sumon Bhaumik: University of Sheffield
Nigel Driffield: University of Warwick
Katiuscia Lavoratori: University of Reading
Meng Song: University of Leeds
Priit Vahter: University of Tartu

The Journal of Technology Transfer, 2025, vol. 50, issue 5, No 18, 2476-2508

Abstract: Abstract This paper delves into the pivotal role of institutions in facilitating knowledge spillovers, particularly in the context of multinational enterprises (MNEs) and knowledge transfer. While extant literature highlights the positive correlation between good institutional quality and knowledge transfer, this paper introduces a nuanced perspective. It argues for an inverted U-shaped relationship, suggesting that MNEs may exhibit reluctance in knowledge transfer to subsidiaries not only in environments with low institutional quality, as conventionally discussed, but also in those characterized by high institutional quality. In fact, there are beneficial implications of good institutions for domestic firms as well, enabling greater capacity to absorb knowledge and thereby emerge as competitors of MNEs. The paper demonstrates an inverted U-shaped relationship between spillovers, to capture knowledge transfer, and the quality of local institutions. This study provides valuable insights into the complex dynamics of knowledge spillovers, emphasizing the multifaceted influence of institutional environments on knowledge dissemination and economic development.

Keywords: Inward FDI; Spillovers; Knowledge transfer; Institutions; Emerging markets; Random parameter model (search for similar items in EconPapers)
JEL-codes: D22 F23 R58 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10961-025-10230-w

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