The Decisive Role of Sectoral Technology Intensity in the Impact of International Technology Diffusion on Innovation Performance: An Empirical Application on the Turkish Manufacturing Industry

The increasing pressure of competition in a globalizing world forces the countries that aim to grow rapidly to strengthen their market share. This requires technological innovation, and its primary source is scientific knowledge. Hence, the main aim of this study is to investigate the determining role of the sectoral technology intensity on the impact of international technology spillovers channels on innovation performance. For the aim of the study, 900 observations that belong to 320 firms for the period of 2009–2016 are obtained by matching approximately 350.000 of the survey data of the Business Statistics, Research and Development. Activities and Innovation provided by TUİK. Findings estimated by the System Generalized Method of Moments (SGMM) indicate that technology absorptive capacity has a positive and significant effect on the innovation performance of the firms operating only in high-tech industries. Foreign Direct Investments (FDI) has a stronger effect on firms' innovation performance in low-technology-intensive sectors than in high-tech-intensive sectors. There is no significant difference between sectoral technology intensities in the effect of export activities on innovation performance of firms. On the other hand, technology transfer expenditures have a statistically slightly positive and significant effect only for firms operating in high-technology-intensive sectors. Consequently, the government should support high technology intensive sectors instead of traditional low technology intensive sectors in order to benefit more from the international technology diffusion channels in Turkish manufacturing industry. This strategy can lead to a long-term economic growth.

The Influence of FDI and Human Capital Inflow on Technological Progress

FDI and human capital flow, as an important path of international technology diffusion, is an important driving force for technological progress in a region. Using panel data of 30 provinces and cities in China, this paper examines the relationship between FDI, human capital flow and technological progress in different regions of China. The empirical results show that the two approaches play an important role in technological progress in different regions of China, but the contribution degree is different. Various regions should implement appropriate policies to make full use of the technology spillover effect of export and human capital flow to accelerate technological progress, and form a smooth domestic technology diffusion mechanism to accelerate the transmission of foreign RESEARCH and development, and finally promote the coordinated development of regional economy.

Foreign Direct Investment and International Technology Diffusion

Foreign direct investment (FDI) plays an important role in facilitating the process of international technology diffusion. While FDI among industrialized countries primarily occurs via international mergers and acquisitions (M&As), investment headed to developing countries is more likely to be greenfield in nature; that is, it involves the establishment or expansion of new foreign affiliates by multinational firms. M&As have the potential to yield productivity improvements via changes in management and organization structure of target firms, whereas greenfield FDI leads to transfer of novel technical know-how by initiating the production of new products in host countries as well as by introducing improvements in existing production processes. Given the prominent role that multinational firms play in global research and development (R&D), there is much interest in whether and how technologies transferred by them to their foreign subsidiaries later diffuse more broadly in host economies, thereby potentially generating broad-based productivity gains. Empirical evidence shows that whereas spillovers from FDI to competing local firms are elusive, such is not the case for spillovers to local suppliers and other agents involved in vertical relationships with multinationals. Multinationals have substantially increased their investments in research facilities in various parts of the world and in R&D collaboration with local firms in developing countries, most notably China and India. Such international collaboration in R&D spearheaded by multinational firms has the potential to accelerate global productivity growth.

Joint and Cross-Border Patents as Proxies for International Technology Diffusion

With the advent of globalization, economic and financial interactions among countries have become widespread. Given technological advancements, the factors of production can no longer be considered to be just labor and capital. In the pursuit of economic growth, every country has sensibly invested in international cooperation, learning, innovation, technology diffusion and knowledge, and outward direct investment. In this paper, we use a panel data set of 40 countries from 1981 to 2008 and a negative binomial model, using a novel set of cross-border patents and joint patents as proxy variables for technology diffusion, in order to investigate such diffusion. The empirical results suggest that, if it is desired to shift from foreign to domestic technology, it is necessary to increase expenditure on R&D for business enterprises and higher education, exports and technology. If the focus is on increasing bilateral technology diffusion, it is necessary to increase expenditure on R&D for higher education and technology. It is also found that outward foreign direct investment has no significant impact on either joint or cross-border patents, whereas inward foreign direct investment has a significant negative impact on cross-border patents but no impact on joint patents. Moreover, government expenditure on higher education has a significant impact on both cross-border and joint patents.

HOW DOES FOREIGN R&D AFFECT OECD EXPORT COMPETITIVENESS?

This study is motivated by the observation that there are two East Asian countries, South Korea and China, emerging as major R&D players in the world during the past two decades. In addition to spillovers originated from the traditional R&D countries, the present study incorporates both direct and indirect spillovers from South Korea and China into the determination of the export performance of the OECD countries. The theoretical justification for the linkages of trade-related spillovers to export competitiveness is outlined in the theoretical model extended from [Keller, W (2004). International technology diffusion. Journal of Economic Literature, 42, 752–782.]. Our empirical investigation is focused on assessing the association of spillovers with both the capacity and technological content of export. To this end, the empirical model linking R&D spillovers to a composite measure of export competitiveness is constructed. Our results indicate the persistence of the two East Asian major R&D players in influencing the export capacity and technological content of the OECD countries. The results in turn suggest that maintaining a close relationship with South Korea and China can mitigate the competitiveness–dampening effect resulting from the R&D activities of large industrialized countries.