International Technology Diffusion and Growth in the Manufacturing Sector of Developing Economies

This paper evaluates various channels through which foreign technology diffuses to the manufacturing sector of selected developing economies. These economies carry out very little (if any) own R&D so they rely on foreign technology to a much larger extent than developed economies. We investigate the direct effect of foreign R&D, as well as technology embodied in imports of intermediate and capital goods and foreign direct investment, on the growth of manufacturing total factor productivity and value added in 32 developing economies during the 1965-1992 period. We find that foreign R&D typically has the biggest positive impact on domestic productivity and value added growth. Imports of technology goods and foreign direct investment also play a similar positive role but their effect is of smaller magnitude and is not always significant.