Innovative and Absorptive Capacity of International Knowledge : An Empirical Analysis of Productivity Sources in Latin American Countries

This paper examines two sources of global knowledge spillovers: foreign direct investments and trade. Empirical evidence demonstrates that foreign direct investment and trade can contribute to overall domestic productivity growth only when the technology gap between domestic and foreign firms is not too large and when a sufficient absorptive capacity is available in domestic firms. The paper proposes the terms research and development and labor quality to capture the innovative and absorptive capacity of the country. The spillover effects in productivity are analyzed using a stochastic frontier approach. This productivity (in terms of total factor productivity) is decomposed using a generalized Malmquist output oriented index, in order to evaluate the specific effect in technical change, technical efficiency change, and scale efficiency change. Using country-level data for 16 Latin American countries for 1996-2006, the empirical analysis shows positive productivity spillovers from foreign direct investment and trade only when the country has absorptive capacity in terms of research and development. Foreign direct investment and trade spillovers are found to be positive and significant for scale efficiency change and total productivity factor change.

Bibliographic Details

Main Authors:	Castillo, Leopoldo Laborda, Salem, Daniel Sotelsek, Guasch, Jose Luis
Language:	English
Published:	2012-01-01
Subjects:	AGRICULTURE, CAPABILITY, CAPABILITY BUILDING, CAPITAL EXPENDITURES, COMPARATIVE ADVANTAGE, COMPARATIVE ECONOMICS, COMPETITIVENESS, COUNTRY RISK, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DIRECT FOREIGN INVESTMENT, DOMESTIC FIRMS, DOMESTIC MARKET, E-MAIL, ECONOMETRICS, ECONOMIC DEVELOPMENT, ECONOMIC EFFICIENCY, ECONOMIC GROWTH, ECONOMIC RESEARCH, ECONOMIC SYSTEMS, ECONOMICS, ELASTICITY, ELECTRICITY, EQUIPMENT, EQUITY CAPITAL, EXCHANGE RATE, EXCHANGE RATES, EXCHANGE TRANSACTIONS, EXPORTS, EXTERNALITIES, FDI, FINANCE CORPORATION, FIXED CAPITAL, FIXED COSTS, FIXED INVESTMENT, FOREIGN DIRECT INVESTMENT, FOREIGN DIRECT INVESTMENTS, FOREIGN EXCHANGE, FOREIGN FIRM, FOREIGN FIRMS, FOREIGN INVESTMENT, FOREIGN INVESTORS, GDP, GLOBAL DEVELOPMENT FINANCE, GLOBAL ECONOMY, GLOBAL KNOWLEDGE, GROSS FIXED CAPITAL FORMATION, GROSS VALUE, GROWTH CYCLES, GROWTH THEORIES, HOST COUNTRIES, HOST COUNTRY, HUMAN CAPITAL, INCOME, INDUSTRIAL COUNTRIES, INDUSTRIAL DEVELOPMENT, INDUSTRIAL ECONOMICS, INDUSTRIALISING ECONOMIES, INEFFICIENCY, INNOVATION, INTERNATIONAL COMPETITIVENESS, INTERNATIONAL ECONOMICS, INTERNATIONAL FINANCE, INTERNATIONAL FINANCIAL, INTERNATIONAL LABOUR ORGANIZATION, INTERNATIONAL STANDARD, INTERNATIONAL TRADE, KNOWLEDGE GENERATION, LABOR COSTS, LABOR FORCE, LABOR MOBILITY, LABOUR, LONG-TERM INVESTMENTS, MANUFACTURING, MANUFACTURING FIRMS, MANUFACTURING SECTOR, MARGINAL COST, MARKET POTENTIAL, MARKET STRUCTURE, MATERIAL, MNE, MULTINATIONAL CORPORATIONS, MULTINATIONAL ENTERPRISE, MULTINATIONAL ENTERPRISES, NATURAL RESOURCE, NATURAL RESOURCES, NEW TECHNOLOGY, OPEN ACCESS, OPEN ECONOMY, OUTPUTS, PHONE, POTENTIAL OUTPUT, PRIVATE INVESTMENT, PRIVATE SECTOR, PRIVATIZATION, PRODUCTION FUNCTION, PRODUCTION FUNCTIONS, PRODUCTIVITY, PRODUCTIVITY GROWTH, PUBLIC POLICY, R&D, RAPID EXPANSION, REAL ESTATE, REINVESTMENT, REINVESTMENT OF EARNINGS, RESULT, RESULTS, RETAIL TRADE, SUBSTITUTION EFFECT, TECHNOLOGICAL CHANGES, TECHNOLOGICAL PROGRESS, TECHNOLOGY GAP, TECHNOLOGY SPILLOVER, TECHNOLOGY SPILLOVERS, TECHNOLOGY TRANSFER, TECHNOLOGY TRANSFERS, TIME PERIOD, TIME PERIODS, TOTAL FACTOR PRODUCTIVITY, TOTAL FACTOR PRODUCTIVITY GROWTH, TRADE POLICIES, TRADE POLICY, TRADE REFORMS, TRANSITION COUNTRIES, TRANSITION ECONOMIES, UNEMPLOYED, UNSKILLED LABOR, USES, VALUE ADDED, VARIABLE COSTS, WEB, WORLD DEVELOPMENT INDICATORS, WORLD TRADE, WORLD TRADE ORGANIZATION,
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120103140509 https://hdl.handle.net/10986/3217
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