International Trade, Foreign Direct Investment (FDI) and International Technology Transfer: A Comparative Study of Asian and African Economies
Abstract: This paper investigates the long-run equilibrium relationships and short-term effect of international trade and Foreign Direct Investment (FDI) on international technology transfers in selected African and Asian countries from 1980 to 2013.The Johansen and Juselius multivariate co-integration technique and the granger causality test was used to test these relationships. The findings confirmed the presence of co-integrating vectors in the models of these countries. The outcome of the test posits short-run causal relationships, which run either bidirectionally or unidirectionally in all the variables for the selected countries. However, the most interesting lesson for many developing countries in Africa and Asia is that this study confirmed that international technology transfers supported domestic investment, economic growth, exports and imports of goods and services in some of these countries. Finally, all the variables in each model adjusted to equilibrium in the long-run, except for domestic investment in the Malaysian, Nigerian and Indian systems. The study thereby suggests an improved government policies and regulatory framework to improve international technology transfers, domestic investment, economic growth, and exports and imports of goods and services.
Keywords: International Technology Transfer, Foreign Direct Investment, Trade, Vector Error Correction Modeling, Africa, Asia
Collins, S. & Bosworth, B. (1996). Economic growth in East Asia: Accumulation versus assimilation. Brookings Papers on Economic Activity, 2, 135-203. Craig, J. C. (2001). Japanese Foreign Direct Investment in Thailand. Mid-Atlantic Journal of Business, 1(3), 564-578. Cuthbertson, K., Hall, S. G. & Taylor, M. P. (1992). Applied econometric techniques, NY: Simon and Schuster, 55-105.
Deme, M. & Graddy, D. (2006). Trade, foreign direct investment, and endogenous growth: An empirical investigation. Indian Journal of Economics and Business. Downloaded from: http://findarticles.com/p/articles/mi_m1TSD/is_2_5/ai_n25012653on 20 July 2008.
Diao, X. & Stokke, H. E. (2005). International spillovers, productivity growth and openness in Thailand: An intertemporal general equilibrium analysis. Journal of Development Economics, 76(2), 429-450. Doldado, J., Jenkinson, T. & Sosvilla-Rivero, S. (1990). Cointegration and unit root. Journal of Economic Surveys, 4(3), 249-273. Dollar, D. (1992). Outward oriented developing economies really do grow more rapidly: Evidence from 95 LDCs, 1976-85. Economic Development and Cultural Change, 7(3), 523-544. Fedderke, J. W. & Romm, A. T. (2004). Growth impact and determinants of foreign direct investment into South Africa. University of Cape Town. Working Paper: 12. Fosfuri, A., Motta, M. & Ronde, T. (2001). Foreign direct investment and spillovers: Through workers mobility. Journal of International Economics, 53(4), 205-222. Granger, C. W. J. (1969). Investigating causal relations by econometric models and cross spectral methods. Econometrica, 35(3), 424-438. Granger, C. W. J. & Newbold, P. (1974). Economic forecasting: The atheist’s viewpoint. In: D. Asteriou and S. G. Hall (2007, p. 293). Applied econometrics: A modern approach (revised ed.), NY: Palmgrave Macmillan. Granstrand, O. (1998). Towards a theory of the technology based firm. Research Policy, 27(5), 465-489. Grossman, G. M. & Helpman, E. (1990). Trade, innovation, and growth. The American Economic Review, 80(2), 86-91. Hailu, Z. A. (2010). Demand Side Factors Affecting the Inflow of Foreign Direct Investment to African Countries: Does Capital Market Matter? International Journal of Business and Management, 5(5), 104-116. Hasbrouk, J. (1996). Order characteristics and stock price evolution: An application to program trading. Journal of Financial Economics, 12(3), 365-381. Havránek, T. & Iršová, Z. (2010). Meta-analysis of intra-industry FDI spillovers: Updated evidence. Journal of Economics and Finance, 60(2), 151-174. Heston, A., Summers, R. & Aten, B. (2002). Penn World Table Version 6.1, Center for International Comparisons at the University of Pennsylvania (CICUP), accessed from: httpon1 July, 2008.
Hoekman, B. M., Maskus, K. E. & Saggi, K. (2004). Transfer of technology to developing countries: Unilateral and multilateral policy options. World Bank Policy Research Working Paper 3332. Downloaded fromhttp://wwwwds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2004/07/29/000160016_20040729155005/Rendered/PDF/wps3332.pdfon 21 July 2008. Imoudu, E. C. (2012). The impact of Foreign Direct Investment on Nigeria’s economic growth; 1980-2009: Evidence from the Johansen’s cointegration approach. International Journal of Business and Social Science, 3(6), 122-134 Iršová, Z. & Havránek, T. (2013). Determinants of horizontal spillovers from FDI: Evidence from a large Meta-analysis. World Development, 42(3), 1-15. Javorcik, B. S. (2004). Does FDI increase the productivity of domestic firms? In search of Spillovers through backward linkages. The American Economic Review, 94(3), 605-627. Jiménez, A. (2011). Political risk as a determinant of Southern European FDI in neighboring developing countries. Emerging Markets Finance and Trade, 47(4), 59-74.
Johnson, A. (2006). The Effects of FDI inflows on host country economic growth, CESIS Electronic Working paper series (No. 58). Downloaded from: http://www.infra.kth.se/cesis/documents/WP58.pdfon 31 May 2008. Johansen, S. & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration- with application to the demand for money. Oxford Bulletin of Economics and Statistics, 52(2), 169-210.
Kandil, M. (2011). Financial flows to developing and advanced countries: Determinants and implications. International Journal of Development Issues, 10(1), 60-91.
Keller, W. (2001). The geography and channels of diffusion at the world's technology frontier. NBER Working Paper 8150. NBER, MA: Cambridge. Keller, W. (2002). Trade and the transmission of technology. Journal of Economic Growth, 7(3), 5–21. Kimura, H. & Todo, Y. (2010). Is Foreign Aid a Vanguard of Foreign Direct Investment? A Gravity-Equation Approach. World Development, 38(4), 482–497. Kinda, T. (2010). Investment Climate and FDI in Developing Countries: Firm-Level Evidence. World Development, 38(4), 498–513. Klenow, P. & Rodriguez-Clare, A. (1997). The neoclassical revival in growth economics: Has it gone too far? NBER Macroeconomics Annual, 73–103. Kojima, K. (2000). The flying geese model of Asian economic development: origin, theoretical extensions, and regional policy implications. Journal of Asian Economics, 11(2), 375–401. Lee, H. H. & Tan, H. B. (2006). Technology transfer, FDI and economic growth in the ASEAN Region. Journal of the Asia Pacific Economy, 11(4), 394–410.
Leete, R. (2006). Malaysia international trade, growth, poverty reduction and human development. UNDP Reports. Accessed from: http://www.undp.org.my/index.php?option=com_content&view=article&id=336&Itemid=644on 13 July, 2008. Lemoine, F. & Ünal-Kesenci, D. (2004). Assembly trade and technology transfer: The case of China. World Development, 32(5), 829-850. Lim, E. (2001). Determinants of, and the relation between, FDI and growth: A summary of the recent Literature. In: V. Kathuria, (2000, pp. 343-369). Productivity spillovers from technology transfer to Indian manufacturing firms. Journal of International Development, 12(3), 234-245. Lloyd, P. J. (1996). The role of Foreign Investment in the success of Asian. Journal of Asian Economics, 7(3), 407-433. Madsen, J. B. (2007). Technology spillover through trade and TFP convergence: 135 years of evidence for the OECD countries. Journal of International Economics, 72(3), 464–480.
Mahe, S. A. (2005). Is globalization capable of raising living standards, through international trade in Nigeria? Downloaded from: http://www.hollerafrica.com/showArticle.php?artId=143&catId=2on 21 July, 2008. Markusen, J. R. (1995). Incorporating the multinational enterprise into the theory of international trade. Journal of Economic Perspectives, 9(1), 169-190. Masih, R. & Masih, A. M. (1996). Macroeconomic activity dynamics and Granger causality: New Evidence from a small developing economy based on a vector error-correction modeling analysis. Economic Modeling, 13(3), 407-426. Mazenda, A. (2014). The effect of foreign direct investment on economic growth: Evidence from South Africa. Mediterranean Journal of Social Sciences, 5(10), 95-108. Meyer, E. K. (2004). Perspectives on multinational enterprises in emerging economies. Journal of International Business Studies, 35(4), 259-276. Mohamed, S. E. & Sidiropoulos, M. G. (2010). Another Look at the Determinants of Foreign Direct Investment in MENA Countries: An Empirical Investigation. Journal of Economic Development, 35(2), 75-96. Okejiri, E. (2000). Foreign technology and development of indigenous technological capabilities in the Nigerian manufacturing industry. Technology in Society, 22(2), 189-199. Onafowora, O. A. & Owoye, O. (2006). An empirical investigation of budget and trade deficits: The case of Nigeria. The Journal of Developing Areas, 39(2), 115-145. Pupphavesa, W. & Grewe, M. (1994). Enhancing Thailand's trade policy through AFTA. TDRI Quarterly Review, 9(2), 7-12. Reece, C. & Sam, A. G. (2012). Impact of pension privatization on foreign direct investment. World Development, 40(2), 291-302. Rehman, C. A. Orangzab, & Raza, A. (2011). Determinants of foreign direct investment and its impact on GDP growth in Pakistan. Interdisciplinary Journal of Contemporary Research in Business, 2(9), 198-205 Romer, P. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(2), 1002-1037. Sachs, J. & Andrew W. (1995). Economic reform and the process of global integration. Brookings Papers on Economic Activity, 1(3), 1-118.
Saggi, K. (2002). Trade, foreign direct investment and international technology transfer: A survey. The World bank Research Observer, 17(2), 191-235. Sasidharan, S. & Ramanathan, A. (2007). Foreign Direct Investment and spillovers: Evidence from Indian manufacturing. International Journal of Trade and Global Markets, 1(1), 5-22. Schwarz, G. (1978). Estimating the dimension of a model. In: D. Asteriou and S. G. Hall (2007, p. 66). Applied econometrics: A modern approach. (revised ed.), NY: Palmgrave Macmillan. Sims, C. A. (1980). Macroeconomics and reality. Econometrica, 48(3), 1-48. Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70(1), 65-94. Sridharan, P., Vijayakumar, N. & Chandra S. R. (2009). Causal Relationship between Foreign Direct Investment and Growth: Evidence from BRICS Countries. International Business Research, 2(4), 1-40. Stanley, T. D., Doucouliagos, H., Giles, M., Heckemeyer, J. H., Johnston, R. J., Laroche, P., (2013). Meta-analysis of economics research reporting guidelines. Journal of Economic Surveys, 27(2), 390-394. Strazicich, M. C., Lee, J. & Day, E. (2004). Are incomes converging among OECD countries? Time series evidence with two structural breaks. Journal of Macroeconomics, 26(3), 131-145. Tian, X. (2007). Accounting for sources of FDI technology spillovers: Evidence from China. Journal of International Business Studies, 38(3), 147-159.
UNCTAD. (1999). World investment report: foreign direct investment and the challenge of development, New York and Geneva: United Nations.
UNCTAD. (2002). Trade and development report 2002, New York and Geneva: United Nations. UNCTAD. (2009). World investment report. Transnational corporations, agricultural production and development. New York and Geneva: United Nations. UNCTAD. (2013). World investment report: Global value chains: Investment and trade for development. New York and Geneva: The United Nations. UNCTAD. (2015). World investment report. New York: United Nations. UNDP. (2014). United Nations Development Programme, Human Development Report (2014).
UNDP. (2007). Human development reports –indicators by tables. Accessed from: http://hdrstats.undp.org/indicators/indicators_table.cfmon 03 July 2008. Urata, S. & Yokota, K. (1994). Trade liberalization and productivity growth in Thailand. Developing Economies, XXXII (4), 444–459. Usman, A. & Ibrahim, W. (2012). Foreign Direct Investment and Monetary Union in ECOWAS Sub-Region: Lessons from Abroad. Journal of Applied Finance & Banking, 2(4), 185-192
World Trade Organization [WTO]. (2001). Third trade policy review of Malaysia. Downloaded from: http://www.wto.org/english/tratop_e/tpr_e/tp180_e.htmon 14 July, 2008
World Trade Organization [WTO]. (2007). International trade statistics –2007. Downloaded from: http://www.wto.org/english/res_e/statis_e/its2007_e/its2007_e.pdfon 31 May 2008. Young, A. (1994). Lessons from the East Asian NICs: A contrarian view. European Economic Review, 38(3), 964-973.
This work is licensed under a Creative Commons Attribution 4.0 International License.
Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of revised paper in the light of suggestions of the reviewers editorial team at IFRD edits and formats manuscripts to bring uniformity and standardization in published material.
This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.