Saggi, Kamal2013-12-192013-12-192002-09-01World Bank Research Observerhttps://hdl.handle.net/10986/16417What role does trade play in international technology transfer? Do technologies introduced by multinational firms diffuse to local firms? What kinds of policies have proved successful in encouraging technology absorption from abroad and why? Using these questions as motivation, this article surveys the recent trade literature on international technology transfer, paying particular attention to the role of foreign direct investment. The literature argues that trade necessarily encourages growth only if knowledge spillovers are international in scope. Empirical evidence on the scope of knowledge spillovers (national versus international) is ambiguous. Several recent empirical plant-level studies have questioned earlier studies that argued that foreign direct investment has a positive impact on the productivity of local firms. Yet at the aggregate level, evidence supports the view that foreign direct investment has a positive effect on economic growth in the host country.en-USCC BY-NC-ND 3.0 IGOABSTRACTSACCESSORIESARBITRAGEATTRIBUTESAUTOMOBILEAUTOMOBILESBASICBERTRAND COMPETITIONBEST PRACTICESBILATERAL INVESTMENTBILATERAL INVESTMENT TREATIESBUYERSCAPITAL FLOWSCAPITAL INFLOWSCAPITAL INVESTMENTCLOSED ECONOMYCOLLABORATIONCOMPARATIVE ADVANTAGECOMPETITION LAWCOMPETITION POLICYCOMPUTER INDUSTRYCONSUMERSDOMESTIC FIRMDOMESTIC FIRMSDOMESTIC INVESTMENTDOMESTIC SUPPLIERSDUOPOLYECONOMIC ACTIVITYECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC REFORMECONOMICS LITERATUREECONOMIES OF SCALEENDOGENOUS VARIABLESENGINEERINGENGINEERSEQUIPMENTEXPORT PROMOTIONEXPORTSEXTERNALITIESFACTORS OF PRODUCTIONFDIFIXED COSTFIXED COSTSFOREIGN AFFILIATEFOREIGN AFFILIATESFOREIGN COMPETITIONFOREIGN DIRECT INVESTMENTFOREIGN EXPORTERSFOREIGN FIRMFOREIGN FIRMSFOREIGN INVESTMENTFOREIGN INVESTORSFOREIGN MARKETFOREIGN MARKETSFOREIGN OWNERSHIPFOREIGN PARTICIPATIONFOREIGN PRODUCERSFOREIGN TECHNOLOGIESFOREIGN TECHNOLOGYFREE TRADEGDPGOVERNMENT POLICIESGOVERNMENT POLICYGROSS DOMESTIC PRODUCTGROWTH MODELSGROWTH RATEGROWTH THEORYHOST COUNTRIESHOST COUNTRYHOST ECONOMYHUMAN CAPITALIMPERFECT COMPETITIONIMPORT SUBSTITUTIONINCOME LEVELSINCREASING RETURNSINCREASING RETURNS TO SCALEINDUSTRIAL COUNTRIESINDUSTRIAL COUNTRYINDUSTRIAL DEVELOPMENTINDUSTRIALIZATIONINFORMATION ACQUISITIONINNOVATIONSINTANGIBLE ASSETSINTELLECTUAL PROPERTYINTELLECTUAL PROPERTY RIGHTSINTERNATIONAL BUSINESSINTERNATIONAL TRADEINVENTORSINVESTMENT CLIMATEINVESTMENT DECISIONSINVESTMENT POLICIESJOINT VENTUREJOINT VENTURESKNOW-HOWLEARNINGLICENSELICENSE FEESLITERACYMANUFACTURINGMANUFACTURING FIRMSMARGINAL COSTMARGINAL COSTSMARGINAL PRODUCTMARKET FAILURESMARKET SIZEMARKET STRUCTUREMARKETINGMENUMONOPOLYNEOCLASSICAL MODELSNEW TECHNOLOGIESNEW TECHNOLOGYOPEN ECONOMIESOPEN ECONOMYPATENTSPER CAPITA INCOMEPOLITICAL PROCESSPOSITIVE EXTERNALITIESPOSITIVE EXTERNALITYPRODUCT DIFFERENTIATIONPRODUCTION FUNCTIONPRODUCTION PROCESSPRODUCTION TECHNIQUESPRODUCTIVITYPRODUCTIVITY GROWTHPROFIT MAXIMIZATIONPROPERTY RIGHTSPROPRIETARY KNOWLEDGEPROTECTIONISMPUBLIC GOODR&DRESULTRESULTSSCALE EFFECTSSEARCHSEMICONDUCTORSEMICONDUCTOR INDUSTRYSILICONSTORAGE FACILITIESSUBSTITUTION EFFECTSUNK COSTSTECHNOLOGICAL CAPABILITYTECHNOLOGICAL CHANGETECHNOLOGICAL INNOVATIONTECHNOLOGICAL SOPHISTICATIONTECHNOLOGY LICENSINGTECHNOLOGY SPILLOVERSTECHNOLOGY TRANSFERTECHNOLOGY TRANSFERSTOTAL COSTSTOTAL FACTOR PRODUCTIVITYTRADE BARRIERSTRADE POLICYTRANSMISSIONTURNOVER RATESUSESVERTICAL LINKAGESWAGESWORLD TRADEJournal ArticleWorld Bank10.1596/16417