High tech foreign direct investment and its impact on economic development

Recent empirical studies concerning the impact of foreign direct investment (FDI) on economic development have all been taking into account FDI as a whole. However, the theoretical literature on the topic argues that more attention should be devoted to distinguishing FDI by type, and suggests that FDI with high technological content might play a peculiar role. This paper investigates the existence and the magnitude of this peculiar effect. With reference to developing countries, we find strong evidence that countries with a larger population and a larger stock of human capital, and countries that enjoy lesser uncertainty, are able to attract more FDI with a higher technological content. We also find evidence pointing towards a positive relationship between the share of technology embodied into FDI and the level of economic development in the host country.