Technology transfer, knowledge spillover and foreign direct investment

Abstract This study explores the role of Multinational Enterprises and Foreign Direct Investment have in fostering regional economic development in emerging markets, via the process of technology transfer within the context of the Knowledge Spillover Theory of Entrepreneurship. We examine the effects of Foreign Direct Investment, sectoral clustering, and firm heterogeneity on productivity and local entrepreneurship development using the transformational case of Costa Rica. This paper contributes to the research in the dynamics of intra- and inter-industry spillover effects, comparing the impact of foreign Multinational Enterprises on local entrepreneurial development with that of and within local Specialized Exporting Companies. The findings suggest that knowledge spillovers are sector-specific, affecting industries in unique ways, and generating significant policy implications for targeting industry-specific knowledge and technology transfers. Externally generated technology transfer and its spillover effects are ubiquitous, idiosyncratic and different in comparison with second generation spillover effects generated within the local economy.