Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 36: FDI Inflows to Sweden Consequences for Innovation and Renewal

Börje Johansson () and Hans Lööf ()
Additional contact information
Börje Johansson: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Hans Lööf: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Abstract: FDI inflows have expanded rapidly during the past decade. This paper analyses if such inflows do introduce new characteristics of the innovation systems at national and regional levels. The paper studies two phenomena. First, what novelties are brought into the host region (country) when FDI inflows occur? Second, what are the consequences for the innovation intensity, technology transfer and economic performance of firms in a regional (national) economy that experiences FDI inflows? These issues are assessed by examining the characteristics of foreign multinationals and comparing them with the characteristics of multinational, uninational and non-affiliate firms, respectively. The analyses control for location, examine regional impacts, and are based on CIS data (Community Innovation Survey III). The paper contributes to earlier studies in two important ways. First, it compares FDI firms with three other distinct types of corporate structure. Second, it combines results from both parametric and non-parametric estimations. The results indicate that FDI inflows in an unambiguous way renew the local economy when acquiring or replacing domestic multi-unit firms (uninationals). Compared to other types of corporate structure, FDI firms do not seem to improve innovation characteristics of the local economy.

Keywords: FDI; technology transfer; innovation; regional economy

JEL-codes: C21; D21; F23; L23; R11

32 pages, August 12, 2005

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