Home Country Innovation Performance: Moderating the Local Knowledge and Inward Foreign Direct Investment

Abstract

The inward foreign direct investment (FDI) has been emphasized in the literature, and although the benefits related to innovation are known, there is not much information about their effects on emerging economies. This study investigates how local domestic factors such as research and development (R&D), exports and foreign technology acquisition moderate with inward FDI to improve the innovation performance. The empirical findings from a generalized method of moments (GMM) estimator suggest, at short term, that the FDI has a positive effect in the Brazilian manufacturing industry. As a complementary effect, there is an interaction between FDI inflows and exports, increasing the innovation performance. However, improvements in R&D-related FDI is not observed. For this reason, the results suggest FDI-related exports could indicate a mere product adaptation to the foreign market. There is a predominance in import substitution of machines, equipment and software and no evidence of internal R&D investments or R&D-related FDI. Our results suggest managerial and policy implications, once it was observed the high-technology intensity industry sectors show better innovation performance than medium- and low-technology industries. Policymakers should implement better policies to encourage more R&D-related FDI to decrease import substitution and improve the local innovation performance to strengthen the local industry R&D investments.

How firm size moderates the knowledge and affects the innovation performance? Evidence from Brazilian manufacturing firms

“…This is important, once there is a large number of Brazilian firms working in foreign countries (Viglioni & Calegario, 2020). Thus, we suggest that large size firms are more capable to handle different environments.…”

“…Nevertheless, the returns on R&D is kind lower. Additionally, the result goes in a different direction of Viglioni and Calegario (2020). Using industry-level data, the authors found that R&D does not show significance in short-term.…”

“…However, the authors argued that such activity is losing strength in the last years, while in-house R&D seems to recover. On the other hand, Viglioni and Calegario (2020) found evidence of high dependence on technology import, whilst R&D activity, in short term, does not show effects over the innovation in Brazilian manufacturing industries. Accordingly, we introduce the following hypothesis:…”

Level of development, foreign direct investment and domestic investment in food manufacturing

“…The overall crowd-in effect can be explained in the literature. Foreign direct investment is known to promote knowledge, technology transfer, exports expansion, product and process innovation ( Djulius, 2017 ; Jawaid et al, 2016 ; Jin et al, 2019 ; Mohanty & Sethi, 2019 ; Schneider & Wacker, 2020 ; Viglioni & Calegario, 2020 ). Whilst employees could share knowledge on the job, labour mobility within the food manufacturing sector (from MNEs to domestic firms), would also lead to knowledge diffusion.…”

Política Industrial E Internacionalização: Um Estudo Dos Efeitos Da Intervenção Estatal Na Internacionalização Brasileira

“…Entretanto, entender os efeitos das políticas industriais sobre o processo de internacionalização brasileira ainda é um ponto a ser discutido. Essa investigação é relevante, uma vez que durante os anos de implementação das políticas industriais, como a PITCE, a PDP e o PBM, as exportações tiveram efeito positivo na inovação das empresas brasileiras (Viglioni & Calegario, 2020). De maneira similar, as saídas de IDE do país têm sido de suma relevância para o fortalecimento da economia nacional (Alcântara, Paiva, Bruhn, Carvalho, & Calegario, 2016).…”