The economic impacts of technology transfer and spillovers through foreign direct investment in developing countries

This dissertation consists of three essays. The first essay develops an oligopoly model with endogenous technology spillovers through foreign direct investment (FDI) in developing countries. The foreign entrant brings a superior technology and therefore may spend resources to prevent spillovers of its technology to the home firm. The home firm has an incentive to spend resources to gain these spillovers. This study provides theoretical insight on the positive and negative empirical spillover results of FDI on productivity of local firms. Up to a critical bound, the larger the initial technology gap between the foreign and home firms, the more the home firm spends to gain spillovers. Past that boundary, the home firm decreases spending. As a result, the home firm's profits from spillovers vary, but larger technology gaps engender greater net profit losses from FDI.; The second essay modifies the endogenous growth model with learning-by-doing and knowledge spillovers of Barro and Sala-i-Martin (1999) to analyze the effects of FDI on economic growth in developing countries. The effects of technology transfer and spillovers are separately analyzed. The growth of capital accumulation, consumption, and income depends on the conditions of the population growth, the rate of return on capital, and the net FDI inflow. For a developing country to sustain endogenous economic growth, the required conditions are the higher rate of return on investment and positive foreign capital inflow.; The third essay provides theoretical policy analysis of the effects of intellectual property rights (IPR) protection on the spillover equilibrium and home welfare, using the first oligopoly model. It concludes that private enforcement of the foreign firm's spending to prevent spillovers is complementary to public enforcement of IPR protection. IPR protection affects the home firm's behavior to spend less to gain spillovers. As a result, the spillover ratio decreases in equilibrium and it leads to reduction in consumers' welfare with existing FDI as well as in the home firm's profits. However, stronger IPR protection increases the foreign firm's profits from FDI and thereby increases the likelihood that FDI occurs. The host country can benefit from new FDI that would not otherwise occur.