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Testing an Extended Knowledge-Capital Model of Foreign Direct Investment: The Role of Public Knowledge Inputs

Author

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  • Henk L. M. Kox

    (KVL Economic Policy Research, Hertogenbosch, The Netherlands)

Abstract

The knowledge-capital model explains outward foreign direct investment (FDI) of a country from its relative abundance of its knowledge assets. Early versions of the knowledge-capital theory model these assets as if they were only the results of knowledge investments by private firms. We extend the theory by a formal model of the public-private interaction in knowledge development. This sheds light on the role of the origin country of multinationals. The paper extracts four testable predictions from the model. We use the inter-country variation in national knowledge-creation systems and FDI performance to test the model using a new dataset; it holds knowledge-creation indicators for about 200 countries over the period 2000-2020. Based on a range of non-parametric tests, we can corroborate that the basic tenet of the knowledge-capital model is correct. Moreover, the results show the important role of public knowledge production for outward FDI.

Suggested Citation

  • Henk L. M. Kox, 2024. "Testing an Extended Knowledge-Capital Model of Foreign Direct Investment: The Role of Public Knowledge Inputs," Journal of Information Economics, Anser Press, vol. 2(4), pages 87-120, December.
    • Handle: RePEc:bba:j00008:v:2:y:2024:i:4:p:87-120:d:399
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