Foreign direct investment and technical progress in Spanish manufacturing

Abstract

This article analyses the effects of Foreign Direct Investment (FDI) on technical progress in Spanish manufacturing. Particularly, we study how FDI's contributions vary depending on the economic structure of the industry. The results show that most FDI goes to capital-intensive sectors, especially when those sectors are also Research and Development (R&D)-intensive. Our estimates of the Solow residual show that the positive effect of contemporaneous and lagged FDI on manufacturing productivity is only attributable to capital and R&D intensive industries in what seems to be related to a dynamic capabilities explanation or to complementarities with R&D expenditures.

Keywords:

• knowledge and productivity
• foreign direct investment
• capital intensity
• R&D intensity

JEL Classification::

• F23
• R11
• O32

Acknowledgements

The authors acknowledge the funding received from MICINN-FEDER through the research project ECO2009-09623.

Notes

¹ See, for instance, estimations of the Bank of Spain.