Economics at your fingertips  

FDI and development redux: Is R&D a substitute for FDIs?

Richard Adjei Dwumfour, Lei Pan and Mark Harris

MPRA Paper from University Library of Munich, Germany

Abstract: Using a sample of 130 countries over the period 2004-2019, we revisit the development impact of foreign direct investment (FDI), but this time examine the role of research and development (R&D) in this framework. We use bilateral investment treaties (BITs) as a novel instrument for FDI. We find that compared to FDI, expenditure on R&D has a more pronounced impact on development outcomes – through increasing growth and human development while reducing poverty and inequality. We also find that countries that spend more on R&D are less dependent on FDI for development. Thus, R&D and FDI are substitutes in the development process with the results showing varying FDI and R&D thresholds at which the substitution takes place. We however find the vanishing effect of FDI on development. It turns out that R&D complements FDI only when FDI reaches its threshold and begins to hurt development – at this stage there is sufficient R&D expenditure which possibly suggest sufficient adaptive capacity.

Keywords: FDI; R&D; Economic growth; Poverty; Income inequality (search for similar items in EconPapers)
JEL-codes: F43 O40 (search for similar items in EconPapers)
Date: 2023-01-24
New Economics Papers: this item is included in nep-fdg and nep-int
References: View references in EconPapers View complete reference list from CitEc

Downloads: (external link) original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

Page updated 2024-07-16
Handle: RePEc:pra:mprapa:116117