Outward R&D Spillovers in the Home Country: The Role of Reverse Knowledge Transfer

This study examines how foreign R&D investment may explain interfirm variations in productivity performance of home country firms in terms of spillovers. Many have studied spillovers from MNCs to host country’s firms, but there is still scarce evidence on spillovers from outward FDI to the home country. This study analyzes spillovers from foreign R&D investment and hypothesizes that the benefit of outward R&D spillovers occurs only when knowledge accumulated in foreign R&D centers is effectively transferred to MNCs’ parent companies at home. This benefit depends on the mandate of foreign R&D units, their embeddedness in the host economy, and their entry mode. Using detailed firm-level data for Switzerland, our findings seem to support our arguments.