Abstract:
This paper analyzes the relationship between inward foreign direct investment (FDI), intangible resources and host country’s productivity using industry-level data from ten developed economies in 1987-2003. I question the focus on technology of existing studies on spillovers from foreign to domestic firms. My theoretical discussion suggests that the productivity effects of FDI are influenced not only by R&D, but also other intangibles such as marketing competencies. I find that FDI drives OECD productivity growth, but mostly in industries that rely strongly on intangible resources for their competitive advantage. However, contrary to a number of past studies, R&D in itself or interacted with FDI do not explain OECD industry productivity growth. My findings imply that firms in some industries can benefit from FDI by investing in intangibles other than R&D.