The Impact of Foreign Direct Investment on Technological Innovation

FDI usually involves more than just capital investment across borders. FDI had been assumed as a behind factor in providing significant financial capital updated technological know-how and management proficiency for economic prospects which played a pivotal role in spreading innovation. FDI inflows and a country's ability to absorb them are thought to be closely related to innovation activities. Almost every country globally particularly developing countries works hard to entice more foreign investments. FDI-induced increased competition can either stimulate or stifle innovation. With the continuous expansion of FDI into developing countries a crucial topic for researchers is: How will FDI affect host-country innovation? There is not a lot of empirical research on the connection between FDI and innovation and the few developing country studies that are currently available have had conflicting findings. Therefore we conduct the study to investigate the impact of FDI on technological innovation and consider Sri Lanka as a sample case.