Assessing the Effects of Foreign Direct Investment on Technology Spillovers to Subsidiaries in Iran

Foreign direct investment (FDI) plays a significant role in global business by providing new markets and marketing channels, cheaper resources, access to new technologies, products, skills and financing. One of the most important aspects of FDI for a host country is technology spillover trough which domestic firms gain access to new technologies from international enterprises. Iran, as a developing country, has had some form of engagement with foreign capital for more than 150 years. Nevertheless, there are limited studies on the role of FDI in technology spillover in Iran. This study investigates the effect of technological capabilities of foreign subsidiaries on the relationship between FDI and technology spillover channels including demonstration effect, training effect, collaboration effect, linkage effect and worker turnover. A questionnaire was completed by 100 subsidiary units based in Iran. The sample consists of all foreign subsidiaries active in different industry or service sections all over the country. The results of running logistic regression model on data from questionnaires showed that FDI could not affect spillover channels directly. Yet, the results proved that technological capabilities of subsidiary units, as mediating players, have a positive influence on two spillover channels namely demonstration effect and training effect.