Is foreign direct investment a channel of knowledge spillovers? Evidence from Japan's FDI in the U.S.

Branstetter, Lee

Recent empirical work has examined the extent to which international trade fosters international "spillovers" of technological information. FDI is an alternate, potentially equally important channel for the mediation of such knowledge spillovers. I introduce a framework for measuring international knowledge spillovers at the firm level, and I use this framework to directly test the hypothesis that FDI is a channel of knowledge spillovers for Japanese multinationals undertaking direct investments in the United States. Using an original firm-level data set on Japanese firms' FDI and innovative activity, I find evidence that FDI increases the flow of knowledge spillovers both from and to the investing Japanese firms.

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Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 190
Published Here
February 10, 2011