The contribution of FDI, technology and R&D to spillovers in industrial development: a South African firm-level investigation

Abstract

This article studies the contribution of technological and knowledge spillovers towards the competitiveness of South African manufacturing firms. Literature often emphasizes the role of foreign direct investment (fdi), technology, and research and development (r&d) in spillovers, but seldom consider their effect simultaneously. This study focuses on the micro-economic production level and on the interaction of these factors. It determines their influence on the competitiveness, profits and eventual industrial development. The empirical study utilised data from the World Bank’s firm-level survey on South African manufacturers. The study reveals that direct foreign investments and ownership contribute little towards secondary spillovers, which probably depends on absorptive capacity. Technological advancement is not very significant, while research and development are dependent on absorptive capacity to enhance competitiveness, especially with regard to the investment in human capital. International quality certification, foreign licensing and capacity utilisation all contribute positively towards the ability to enhance productivity growth and the competitiveness of firms.