Essays on trade, foreign direct investment and technological diffusion

This dissertation consists of three independent but related essays on the issue of technological diffusion and international linkages such as trade and foreign direct investment (FDI) within a framework of endogenous growth model.; The first essay examines the evidence for R&D spillovers through trade and foreign direct investment at the industrial sectoral level. Specifically, it focuses on the appropriate measure of foreign technology embodied in imports, and proposes an alternative measure to the traditional measure. With a new measure of foreign technology, this paper then empirically distinguishes between R&D spillovers from import volume and from import variety. Panel estimations with fixed effects use a data set comprised of eight sectors in the manufacturing industry of thirteen OECD countries from 1981 to 1995. The evidence indicates the variety effect dominates the volume effect, and hence import variety proves more important in explaining trade-related technological diffusion. This essay also finds that FDI, often considered an important channel for technological diffusion, only weakly affects domestic productivity.; The second essay asks whether international linkages such as trade and FDI play a role in the sectoral productivity convergence across countries in the long run. Using recently developed panel unit-root procedure, long-run productivity convergence is analyzed with a new disaggregate panel data set at the industrial sectoral level for 25 countries during 1975–1995. This chapter provides evidence that long-run productivity convergence in the manufacturing sector seems to be a prevailing feature among countries that are linked internationally, especially through trade and FDI. The manufacturing sector shows significant productivity convergence, while other sectors show no or little convergence. The results in this paper further indicate that the convergence process is heterogeneous: the speed of the convergence varies across groups. These findings are consistent with the prediction in most theories of economic growth that international linkages (i.e., openness) and spillovers from R&D investment would contribute to convergence across countries.; The third essay presents firm-level evidence that FDI plays a significant role, particularly in technology diffusion from U.S. firms to Korean firms. By using microlevel data for Korean firms' U.S. patents and their citations during 1995, I explore the patterns of technology flows from U.S. firms to Korean firms, and identify the role of FDI in enhancing technology spillovers between countries. I find evidence that Korean firms with FDI in the United States obtain more technology spillovers from U.S. firms than do Korean firms without FDI. I also find that Korean firms obtain more technology spillovers from U.S. firms with FDI in Korea than from those without FDI. However, I find little evidence of differences in the role between inward FDI and outward FDI to Korea.