Until the end of the 1990s, Portugal benefited from backwardness advantages and converged vis-à-vis with the EU average via the effects of Foreign Direct Investment that operated a structural shift towards technology-intensive exports. However, being a small open economy located on the European...

This paper relates to the literature on pecuniary externalities from FDI. Their transmission mechanism is complex, because pecuniary externalities may cause knowledge externalities and inversely. Moreover, each type of externality, or a combination of both, may increase firm productivity. Thus,...