Investigation of the effects of technology transfer based on foreign direct investments on total factor efficiency in emerging economies

The basic neoclassical explanation states that variations in exogenously determined total factor productivity (TFP) growth rates are the only cause of regional variations in long-term growth rates. On the other side, endogenous growth theory contends that foreign direct investment may have an impact on long-term growth through its effect on TFP rather than through its impact on capital accumulation as a channel for knowledge transfer. In endogenous growth theories, technological progress is not considered an exogenous factor but a result of deliberate investment in research, development, and innovation. Technological advancements increase TFP by allowing for more efficient utilization of inputs and the creation of new ways to produce goods and services. With this knowledge in mind, the goal of this thesis is to investigate how foreign direct investments affect developing countries' total factor productivity. Therefore, for 10 developing countries (Brazil, China, Indonesia, India, Mexico, Malaysia, Philippines, Thailand, Turkey, and South Africa), the effect of foreign direct investments, technological development, human capital, trade openness, and inflation on total factor productivity has been investigated for the period of 1990-2019 using with the panel FMOLS coefficient estimator. In addition, the panel vector error correction (VEC) Granger causality test is then used to investigate the causal connection between the variables. The analysis of the data leads to the conclusion that trade openness, human capital accumulation, and technical advancement all eventually increase factor productivity. On the other hand, it is discovered that the factor productivity falls when the inflation rate rises. It is evident that an increase in foreign direct investments raises factor productivity. Finally, the combined effect of foreign direct investment and technological development on factor productivity is examined in order to observe the effect of the increase in foreign direct investment on factor productivity through technology transfer. The findings obtained from this point out that the increase in foreign investments triggers the positive effect of technological development on factor productivity.