Open AccessMultinational corporations, foreign investment, and royalties and license fees: effects on host-country total factor productivity
Author(s) -
Argentino Pessoa
Publication year - 2008
Publication title -
notas económicas/notas económicas
Language(s) - English
Resource type - Journals
eISSN - 2183-203X
pISSN - 0872-4733
DOI - 10.14195/2183-203x_28_1
Subject(s) - total factor productivity , foreign direct investment , multinational corporation , panel data , productivity , license , economics , international economics , monetary economics , payment , international trade , investment (military) , business , econometrics , macroeconomics , finance , political science , law , politics
In this paper we examine the relationship between inward FDI and total factor productivity (TFP) in a framework motivated by the OLI paradigm. A panel data approach is used to study the effects of FDI and payments of royalties and license fees (R&L) on aggregate TFP in a sample of 16 OECD countries, between 1985 and 2002. Our empirical tests show that FDI and R&L have a positive impact on host-country TFP, and also suggest that the amount of positive effects of FDI and R&L is dependent on the level of development of the receiving country. Additionally, our data show that, when other factors remain constant, inward FDI and R&L payments are substitutes in positively influencing TFP of the host country.