From a theoretical point of view, it is traditionally assumed that foreign firms possess a centrally accumulated firm-specific technological advantage over domestic firms (see, for example, Findlay, 1978; Dunning, 1979). Given a sufficient level of absorptive capacity and human capital, domestic firms in host economies are able to benefit from various externalities stimulated by the presence of foreign firms.
Bibliographical noteThis is a post-peer-review, pre-copyedit version of an article published in European journal of developmental research. The definitive publisher-authenticated version Driffield, N., & Jindra, B. (2012). Challenging the production function approach to assess the developmental effects of FDI. European journal of developmental research, 24(1), 32-37 is available online at: http://www.palgrave-journals.com/ejdr/journal/v24/n1/full/ejdr201150a.html
- production functions