Technology sourcing versus technology exploitation: An analysis of US foreign direct investment flows

James H. Love*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


The traditional paradigm of foreign direct investment (FDI) suggests that FDI is undertaken principally to exploit some firm-specific advantage in a foreign country which provides a locational advantage to the investor. However, recent theoretical work suggests a model of FDI in which the motivation is not to exploit existing technological advantages in a foreign country, but to access such technology and transfer it from the host economy to the investing multinational corporation via spillover effects. This paper tests the technology sourcing versus technology exploiting hypotheses for a panel of sectoral FDI flows between the United States and major OECD nations over a 15 year period. The research makes use of Patel and Vega's (Research Policy, 28, 145-55, 1999) taxonomy of sectors which are likely a priori to exhibit technology sourcing and exploiting behaviour respectively. While there is evidence that FDI flows into the United States are attracted to R and D intensive sectors, very little support is found for the technology sourcing hypothesis either for inward or outward FDI flows. The results suggest that, in aggregate, firm-specific 'ownership' effects remain powerful determinants of FDI flows.

Original languageEnglish
Pages (from-to)1667-1678
Number of pages12
JournalApplied Economics
Issue number15
Publication statusPublished - 15 Oct 2003

Bibliographical note

This is an Author's Accepted Manuscript of an article published in Love, J. H. (2003). Technology sourcing versus technology exploitation: an analysis of US foreign direct investment flows. Applied economics, 35(15), 1667-1678 Applied economics 2003 © Taylor & Francis, available online at:


  • foreign direct investment
  • firm-specific advantage
  • technology access
  • technology transfer
  • spillover effects


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