Spillover effects of FDI on innovation in Developing Countries

The most attended aspect of the modern economics is its structure which relies heavily on knowledge and awareness. In this competitive world, paying attention to knowledge and relying on innovation is what makes institutions and macro economics pioneers. In the early 20th century, Joseph Schumpeter and later almost all theoreticians came to believe that the emergence of a phenomenon called job creators or in other words innovative job creators played significant roles in the economic development process4 and, in Schumpeter’s opinion, something that makes these people stand out is their innovation power particularly in new combinations. With regard to the deep technological gap between the developed and developing countries, Foreign Direct Investment (FDI) is one way to transfer modern technologies to the developing countries where these innovations could be applied through this transfer. Since the arrival of foreign direct investment to the developing countries brings about spillovers resulting in innovation expansion in these countries. In this article, the effects of Foreign Direct Investment (FDI) spillovers on innovation in developing countries are dealt with, considering that the panel data5 are arranged in the Pool method for the developing countries where the innovation information have been accessible.