Foreign direct investment, technology sourcing and reverse spillovers

Nigel Driffield, James H. Love

Research output: Contribution to journalArticlepeer-review


Recent theoretical work points to the possibility of foreign direct investment motivated not by 'ownership' advantages which may be exploited by a multinational enterprise but by the desire to access the superior technology of a host nation through direct investment. To be successful, technology sourcing foreign direct investment hinges crucially on the existence of domestic-to-foreign technological externalities within the host country. We test empirically for the existence of such 'reverse spillover' effects for a panel of UK manufacturing industries. The results demonstrate that technology generated by the domestic sector spills over to foreign multinational enterprises, but that this effect is restricted to relatively research and development intensive sectors. There is also evidence that these spillover effects are affected by the spatial concentration of industry, and that learning-by-doing effects are restricted to sectors in which technology sourcing is unlikely to be a motivating influence.
Original languageEnglish
Pages (from-to)659-672
Number of pages14
JournalManchester School
Issue number6
Publication statusPublished - Dec 2003


  • foreign direct investment
  • superior technology
  • direct investment
  • technology sourcing foreign direct investment
  • UK
  • manufacturing industries
  • spills over
  • foreign multinational enterprises


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