Does Linkages with MNEs Improve Firms’ Technological Upgrading in Africa?

Abstract This paper assesses the role of multinational enterprises (MNEs) in technological upgrading in Africa. Specifically, we examine the relationship between MNE linkages with domestic firms—through supply links, equity partnerships and technology licensing arrangements—and technological upgrading in the region. Using firm-level data spanning 47 African countries from the World Bank Enterprise Surveys, we show that links with MNEs are associated with relatively high rates of technological upgrading. Among the three forms of links with MNEs, technology licensing appears to have the most significant effects. Our findings are robust to several checks, including alternative measures of links with MNEs, estimations on subsamples and controls for country-level factors. We explore potential channels and find evidence that links with MNEs reduce financial constraints, increase involvement in research and development and provide training opportunities.