Foreign Direct Investment Spillovers and Innovation Dynamics

Foreign direct investment (FDI) forms a nexus for the transfer of technology, managerial practice and capital across borders, prompting local firms and regions to rethink their own innovation strategies. Spillovers from multinational enterprises (MNEs) occur when domestic actors absorb knowledge through labour mobility, supplier relationships, demonstration effects or collaborative ventures. These dynamics are shaped by the absorptive capacity of host firms, which hinges on human capital, R&D structure and institutional quality. In emerging markets, FDI may stimulate research intensity but can also crowd out local R&D when technological gaps and weak institutions prevail. Eco-innovation emerges as a salient outcome where stringent environmental regulation and pollution intensity moderate the degree to which MNEs catalyse sustainable technological change. Regionally, the heterogeneity of externalities depends on both firm-level characteristics and local governance frameworks, influencing policy design for industrial upgrading and inclusive development.

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Foreign Direct Investment Spillovers and Innovation Dynamics publication trend

The graph below shows the total number of articles in foreign direct investment spillovers and innovation dynamics across all publications each year (not limited to Nature Index journals).

Technical terms

Foreign Direct Investment (FDI): Cross-border capital flows where a firm acquires lasting interest in a foreign enterprise, often linked to technology and knowledge transfer.

Knowledge Spillovers: Unintended diffusion of expertise, processes or technologies from one firm or entity to others in the host economy.

Absorptive Capacity: The ability of firms or regions to recognise, assimilate and apply external knowledge in their own innovation activities.

Eco-innovation: Development of products, processes or practices that reduce environmental impacts, often spurred by regulatory and market pressures.

Institutional Quality: Effectiveness of legal, regulatory and governance frameworks in facilitating business operations and innovation.

References

1. The effects of inward FDI communities on the research and development intensity of emerging market locally domiciled firms: Partial foreign ownership as a contingency. Journal of Business Research (2023).
2. Global eco‐innovation and its local impact in emerging economies: Boundary conditions of environmental regulations and pollution intensity. Journal of Product Innovation Management (2023).
3. The impact of FDI on R&D investment of small and medium-sized enterprises in Vietnam: The role of institutions. International Review of Economics & Finance (2024).