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Article

FDI and International Knowledge Diffusion: An Examination of the Evolution of Comparative Advantage

by 1,*, 2 and 1
1
International Business School, Jinan University, 601 Huangpu W Ave, Guangzhou 510632, China
2
School of Mathematics, University of Birmingham, Ring Rd W, Birmingham B15 2TS, UK
*
Author to whom correspondence should be addressed.
Sustainability 2019, 11(3), 581; https://doi.org/10.3390/su11030581
Received: 13 December 2018 / Revised: 17 January 2019 / Accepted: 19 January 2019 / Published: 22 January 2019
(This article belongs to the Special Issue Services Sector Trade and Investment)
This paper investigates the role of FDI in international knowledge diffusion with a focus on the evolution of the comparative advantage of FDI-host and FDI-source countries. We use data on 99 countries, which leads to 876 country pairs, over the 2001 to 2012 period. Spatial autoregressive (SAR) models are used to investigate the impact of bilateral FDI on the similarity of the comparative advantage between the host and source countries. Empirical results show that the effect of the bilateral FDI on the evolution of the comparative advantage of the host and source countries is statistically significant. Specifically, the larger the scale of bilateral FDI, the more similar the comparative advantage between the host and source countries becomes. We also find that the impact of FDI on international knowledge diffusion is heterogeneous across country pairs and this effect varies across the development gap between the source and host countries. In the case of countries that are not very different in terms of their level of economic development, bilateral FDI has a relatively more significant effect on the similarity of the comparative advantage between countries. Moreover, we find that the similarity of the comparative advantage is spatially correlated, and FDI linkages between country pairs strengthen the spatial correlations. View Full-Text
Keywords: FDI; knowledge diffusion; comparative advantage; spatial autoregressive model FDI; knowledge diffusion; comparative advantage; spatial autoregressive model
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MDPI and ACS Style

Fan, Z.; Li, H.; Pan, L. FDI and International Knowledge Diffusion: An Examination of the Evolution of Comparative Advantage. Sustainability 2019, 11, 581. https://doi.org/10.3390/su11030581

AMA Style

Fan Z, Li H, Pan L. FDI and International Knowledge Diffusion: An Examination of the Evolution of Comparative Advantage. Sustainability. 2019; 11(3):581. https://doi.org/10.3390/su11030581

Chicago/Turabian Style

Fan, Zhaobin, Hui Li, and Lin Pan. 2019. "FDI and International Knowledge Diffusion: An Examination of the Evolution of Comparative Advantage" Sustainability 11, no. 3: 581. https://doi.org/10.3390/su11030581

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