of machines. The authors find that imported machines have a positive impact on total factor
productivity, and that the impact is larger the higher the technological complexity of imported
machines.
The above studies examine the link between TFP, R&D and imports at the aggregate level.
However, as noted by Keller (2001b), R&D spending is highly concentrated by industry. For in-
stance, about 80% of total manufacturing R&D is conducted in only four 3-digit ISIC industries in
OECD countries (chemical products, electrical and non-electrical machinery and transport equip-
ment). Therefore, Keller performs separate regressions for the sample of low-R&D industries and
finds that TFP elasticities are significantly smaller in these industries.
To sum up, preliminary evidence using aggregate data suggests that imports are a highly
relevant channel of international technology diffusion, and that the domestic productivity effect of
knowledge originating abroad is greater the smaller the size and the lower the level of development of
the domestic country, and the greater both the technology intensity of industries and the complexity
of imported machines.
4.2 Foreign direct investment
Haddad and Harrison (1993), Aitken and Harrison (1994) and Harrison (1996) are among the first
to use plant-level panel data to analyze the impact of joint ventures and foreign subsidiaries on
local firms’ productivity in developing countries. These studies ask two related questions, namely,
whether foreign firms exhibit higher productivity levels than local firms, and whether knowledge
spillovers from foreign to local firms raise the latter’s productivity level. Data come from three
developing countries, Cote d’Ivoire (1975-87), Morocco (1985-89) and Venezuela (1983-88). Foreign
firms are defined as all firms with foreign equity that exceed 5% of assets.
As far as the performance of foreign relative to local firms is concerned, these studies find that,
consistent with other evidence, foreign firms generally exhibit higher total factor productivity, pay
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