The most pronounced reason for providing fiscal incentives to attract foreign direct investment (FDI) is that FDI is an effective conduit for technology transfer through technology spillovers to domestically owned firms in the host country. This study analyzes the nature and significance of productivity externalities of FDI to local firms, both in terms of intra-industry and inter-industry spillovers, using firm-level data from Zambia. The results show little evidence in support of intra-industry productivity spillovers from FDI on one hand, and significant inter-industry knowledge spillovers occurring through linkages. The net impact of FDI depends on the interaction between intra-industry and inter-industry productivity effects.
Financed by the National Centre for Research and Development under grant No. SP/I/1/77065/10 by the strategic scientific research and experimental development program:
SYNAT - “Interdisciplinary System for Interactive Scientific and Scientific-Technical Information”.