International technological spillovers through exports and foreign direct investment

This dissertation pursues two objectives. The first objective is to find out whether countries that are more open to trade and foreign direct investment (FDI) do absorb more technological innovations originating in advanced countries. The second objective is to compare the relative importance of exports and FDI to international technology transfer to determine which is the more effective channel. To achieve these two objectives, this research estimates the effect of U.S. exports and U.S. FDI on international diffusion of U.S. technology by using regression analysis.; This dissertation provides evidence in support of growth theory in that more openness to FDI and trade leads to more absorption of foreign technology. In this respect, existing growth theory emphasizes that international technology diffusion is the driving force for total factor productivity (TFP) catch-up. However, TFP catch-up is not necessarily due to technology diffusion. This study differs from existing growth theory in the measure of international technology spillovers. In this dissertation, the amount of payments through royalties and license fees is chosen as a more relevant measure of the acquisition of foreign technology than TFP since most royalties and license fees are payments for the use of technology.; Another important finding of this dissertation is that the exporting channel is relatively more important in transferring technology when all industries are combined. However, FDI performs better than exports when considering manufacturing industries alone. This evidence indicates that the effect of FDI and exports may vary across industry.