The usual perspective on technology spillovers from FDI sees the MNC subsidiary as a passive actor. It presumes that the technological superiority that spreads from subsidiaries to other firms in the host economy is initially created outside it by MNC parent companies, and is delivered to subsidiaries via international technology transfer. The role of subsidiaries is little more than to act as a 'leaky container' lying between the technology transfer pipeline and the absorption of spillovers by domestic firms. This paper suggests a different model in which a substantial part of the potential for spillover is created within local subsidiaries as a result of their own knowledge-creating and accumulating activities in the host economy. We explore empirically the effects of these activities on technology spillovers from FDI using data for industrial firms in Argentina over the period 1992-96. The analysis suggests that significant results can be obtained incorporating subsidiaries' own technological activities as an explanatory variable of the spillover process.

One of the most intriguing aspects of the recent empirical literature on FDI-related spillover effects is the increasing identification of mixed results. A few studies, particularly in advanced countries have found positive effects; however, a more common scenario in recent studies is the prevalence of insignificant or even negative effects. This is despite the fact that theory predicts substantial positive effects in association with a supposed technological superiority of MNCs relative to domestic firms, particularly in the context of less advanced countries. In this paper, by distinguishing subsidiaries according to their orientation to carry out creative vs. exploitation activities in the host economy, we are able to distinguish situations with positive and negative spillover effects, and we explain why they may be emerging. More specifically, we find that only subsidiaries that are oriented to technologically creative activities have significant and positive effects in India. In contrast, subsidiaries oriented mostly to technologically exploitative activities generate negative effects in some circumstances. The implications for theory and policy are discussed.

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