On the Contributions of Knowledge-Intensive Business-Services Multinationals to Laggard Innovation Systems

Foreign direct investment (FDI) is assumed to be a source of knowledge flows across National Innovation Systems, with particular relevance for developing countries. Nonetheless, empirical assessments are usually manufacturing-oriented, providing only a partial view of the phenomena under scrutiny. This article aims at contributing to this body of literature by investigating the impacts of inward FDI on aggregate outcomes of developing countries' National Innovation Systems, taking into account potential contributions from Knowledge-Intensive Business-Services (KIBS) multinationals and their respective comparison with manufacturing investments. Using a panel dataset comprising 38 developing countries (2001-2010), fixed-effects regressions are applied according to a traditional endogenous growth model. Empirical findings underscore the relevance of KIBS MNCs' contributions to host innovation systems in developing countries. These impacts broadly surmount those of manufacturing FDI and they are particularly significant for: (a) value added in services; (b) value added in manufacturing; (c) aggregate export capacity; and (d) international (United States Patent and Trademark Office [USPTO]) patenting activity.