ABSTRACT
With the rapid expansion of multinationals and foreign direct investment (FDI) in the global economy, the effect of FDI on the host economy, particularly on technological progress, has been of great interest to both academics and governments, and remains a contentious issue. Empirical tests of the effect of FDI on technology transfer have generated mixed results. Some studies have found that FDI has a positive effect on productivity (Caves, 1974; Kokko, 1994; Oulton, 1998; Blomstrom and Sjoholm, 1999; Xu, 2000), while others have reported that there is an inverse relationship between FDI and industrial productivity in host countries (Haddad and Harrison, 1993; Aitken and Harrison, 1999).
