The Contribution of FDI, Technology and R&D to Spillovers in Industrial Development: A South African Firm-Level Investigation

This article studies the contribution of technological and knowledgespillovers towards the competitiveness of South African manufacturingfirms. Literature often emphasizes the role of foreign direct investment(FDI), technology, and research and development (R&D) in spillovers,but seldom consider their effect simultaneously. This study focuses onthe micro-economic production level and on the interaction of thesefactors. It determines their influence on the competitiveness, profitsand eventual industrial development. The empirical study utilised datafrom the World Bank’s firm-level survey on South African manufacturers.The study reveals that direct foreign investments and ownershipcontribute little towards secondary spillovers, which probably dependson absorptive capacity. Technological advancement is not verysignificant, while research and development are dependent on absorptivecapacity to enhance competitiveness, especially with regard to theinvestment in human capital. International quality certification, foreignlicensing and capacity utilisation all contribute positively towardsthe ability to enhance productivity growth and the competitiveness offirms.