Section III: Science Technology and Innovation

Title: Do MENA countries benefit from the technology diffusion from FDI?

Author(s): Khaled Elmawazini

Address: Department of Economics, University of Ottawa and KIMEP, 23 Impasse Du Sillon, Gatineau, Quebec, Canada J8Z 2Y7

Reference: Science,Technology and Sustainability in the Middle East and North Africa pp. 91 - 105

Abstract/Summary: This paper investigates the hypothesis that foreign direct investment (FDI) inflows yield positive technology spillovers to MENA countries. To investigate this hypothesis, the literature and empirical studies are reviewed, the channels of technology diffusion from FDI are identified, and the absorptive capacity measures are applied to 13 MENA countries. Recent empirical studies argue that FDI inflows yield positive technology spillovers only if host countries have a certain level of human and technological capabilities. Our main result shows that FDI may yield insignificant technology spillovers to many MENA countries due to the weakness of technological and human capabilities in these countries compared with that in other developing countries. In addition, most of FDIs do not flow to manufacturing sector, which is most relevant for deepening technology spillovers. In consequences, the significance of human and technological capabilities may reflect the important role of government policies in deepening the magnitude of technology spillovers from FDI in MENA countries.

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