Localized spillovers and foreign direct investment: a dynamic analysis

It has been empirically shown that firms invest in foreign countries also with the aim to absorb technological knowledge. However, the recent literature on technological innovation and foreignexpansion has not fully taken into account these features of foreign direct investment. Introducingthis new element into the analysis implies assuming that multinationals and exporters operatewith different degrees of technological spillovers. Our aim is to study how these differences in thetransmission of knowledge may affect the firms’ incentive to innovate and their behaviour in aninternational market, that is their choice between serving foreign markets via exports or foreigninvestment.