THE ROLE OF TECHNOLOGY AS AN ABSORPTIVE CAPACITY IN ECONOMIC GROWTH IN EMERGING ECONOMIES: A NEW APPROACH
Sažetak
Studies have shown that the effects of Foreign Direct Investment (FDI) on economic growth have not always been direct, especially in developing regions; certain characteristics must exist in the economy for the effects of FDI to be well absorbed. Therefore, this study sought to assess the economic impact of FDI on economic growth in Sub-Saharan African (SSA) countries, factoring in technology as an absorptive capacity. Because of the scarcity of data on a viable proxy for technology in the African context, we measure technology in a novel approach, using annual number of published innovation-related papers as a proxy for technological presence. Data from forty-three Sub-Saharan countries over a 19-year period (from 1990 to 2008) was analyzed. Using a Fixed Effects (FE) regression model, the study found that FDI had a negative and significant effect on GDP, which is our proxy for economic growth. However, when FDI is interacted with technology, the relationship turns positive and significant. This implies that countries with technological presence are more able to absorb from FDI than those with little technology. Furthermore, the study found that countries with high technology were able to absorb more from FDI than those with low technology.
Reference
Adams, S. (2009). Foreign Direct Investment, domestic investment, and economic growth in Sub Saharan Africa. Journal of Policy Modeling, 31, 939–949.
Agbloyor, E. K., Gyeke-Dako, A., Kuipo, R., & Abor, J. (2016). Foreign Direct Investment and Economic Growth in SSA: The Role of Institutions. Thunderbird International Business Review, 58, 479–497.
Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2004). FDI and economic growth: the role of local financial markets. Journal of international economics, 64(1), 89-112.
Apter, D. E. (1987). Rethinking development: modernization, dependency, and postmodern politics (No. 330.9 A6). Beverly Hills, CA: Sage.
Aseidu, E. (2002). On the Determinants of Foreign Direct Investment to Developing Countries: is Africa Different? World Development, 30(1), 107-119.
Blomstrom, M., & Kokko, A. (1996). Multinational corporations and spillovers. Journal of Economic Surveys, 12(2), 1-31.
Borensztein, E., De Gregorio, J., & Lee, J. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45 (1), 115-135.
Bwalya , S. M. (2006). Foreign direct investment and technology spillovers: Evidence from panel data analysis of manufacturing firms in Zambia. Journal of Development Economics, 81, 514–526.
Carkovic, M., & Levine, R. (2005). Does foreign direct investment accelerate economic growth?. Does foreign direct investment promote development, 195.
Chakraborty, C., & Nunnenkamp, P. (2008). Economic reforms, FDI and economic growth in India: a sector level analysis. World Development, 36(7), 1192-1212.
Dunning, J. (1992). Multinational Enterprises and Global Economy.
Dutse, A. Y. (2012). Technological Capabilities and FDI-related Spillover: Evidence from Manufacturing Industries in Nigeria. American International Journal of Contemporary Research, 2(8), 201-211.
Fourie, E. (2012). A future for the theory of multiple modernities: Insights from the new modernization theory. Social Science Information, 51(1), 52-69.
Ghali, s., & Rezgui, S. (2008). FDI contribution to Technical Efficiency in the Tunisian Manufacturing Sector. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1260755 on 3/5/2011
IMF. (1991). A study of the Soviet economy. World Bank, OECD and EBRD. Paris: OECD.
Jordaan, J. (2008). Intra & inter industry externalities from foreign direct investment in the Mexican manufacturing sector: new evidence from Mexican regions. World Development, 36(12), 2838-2854.
Kombui, D. N. & Kotey, R. A. (2019). Foreign Direct Investment in an Emerging Economy: Exploring the Determinants and Causal Linkages. Academic Journal of Economic Studies, 5(1), 51-62.
Kotey, R. (2019). Foreign Direct Investment and Spillover Effects in Africa: An Empirical Review. International Journal of Science and Management Studies (IJSMS).
Larrain, J. (2013). Theories of development: Capitalism, colonialism and dependency. John Wiley & Sons.
Lehmann, D. (2010). Development theory: four critical studies. Routledge.
Li, X., & Liu, X. (2005). Foreign direct investment and economic growth: an increasingly endogenous relationship. World Development, 33(3), 393-407.
Liu, Z. (2008). Foreign direct investment and technology spillovers: Theory and evidence. Journal of Development Economics 85 (2008), 176–193.
Marin, A., & Bell, M. (2006). Technology Spillovers from Foreign Direct Investment (FDI): an Exploration of the Active Role of MNC Subsidiaries in the Case of Argentina in the 1990s. Journal of Development Studies, 42(4), 678-697.
Matunhu, J. (2011). A critique of modernization and dependency theories in Africa: Critical assessment.
Preston, P. (2012). Theories of development. Routledge.
Ramirez, M. (2006). Is foreign direct investment beneficial for Mexico? An empirical analysis, 1960-2001. World Development, 34(5), 802-817.
Rehman, N. U. (2016). FDI and economic growth: empirical evidence from Pakistan. Journal of Economic and Administrative Sciences, 32(1), 63-76. DOI:10.1108/JEAS-12-2014-0035
Scott, C. V. (1995). Gender and development: rethinking modernization and dependency theory. Lynne Rienner Publishers Inc.
Sinani, E., & Meyer, K. E. (2004). Spillovers of technology transfer from FDI: the case of Estonia. Journal of Comparative Economics(32), 445-466.
So, A. Y. (1990). Social change and development: Modernization, dependency and world-system theories (No.178). Sage.
Sylwester, K. (2005). Foreign direct investment, growth and income inequality in less developed countries. International Review of Applied Economics, 19(3), 289-300. DOI:10.1080/02692170500119748
Twarowska, K., & Kakol, M. (2013). International business strategy- reasons and forms of expansion into foreign markets. Active citizenship by knowledge management and innovation. Zadar, Croatia.
UNCTAD. (1992). World Investment Report. United Nations, New York.
UNCTAD. (2005). Economic development in Africa; Rethinking the Role of Foreign Direct Investment (Vol. Sales No. E.05.II.D.12 I). New York and Geneva: United Nations Publications. DOI:UNCTAD//GDS/AFRICA/2005/1
UNCTAD. (2010). Foreign direct investment, the transfer and diffusion of technology, and sustainable development. United Nations Conference on Trade and Development, (p. TD/B/C.II/EM.2/2). Geneva.
