Multinationals and Diffusion of Technology between Developed Countries

This paper analyses the role played by foreign direct investment (FDI) as a mechanism through which technology flows between countries. After a short review of the existing literature it is observed that aggregate studies do not obtain evidence of the existence of technology spillovers amongst the OECD countries. These results oppose the presumption among many academics and policy-makers that FDI helps accelerate the process of economic development in host countries. The conclusion drawn is that spillovers have taken place, but that there is a problem of overlap between the variables used in these analyses which prevents their impact being captured properly. JEL Classification: O3, O4, F2.