The Influence of Foreign Direct Investment on Research and Development in EU Countries
The Influence of Foreign Direct Investment on Research and Development in EU Countries

Author(s): Ivana Janjić, Marija Jovanović, Tanja Todorović, Aleksandra Pavlović
Subject(s): Social Sciences, Economy
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Foreign Direct Investment; R&D; Innovation; EU countries
Summary/Abstract: Over the last few decades, in modern conditions of globalization, the innovation landscape has changed quickly, affecting the world. In developed countries and economies in transition, Foreign Direct Investment (FDI) has become a driver of economic development and modernization. Research and Development (R&D) is widely acknowledged as a critical factor that stimulates innovation and technological advancement to increase productivity and economic growth. FDI promotes rapid economic restructuring and facilitates the acquisition of new technologies. FDI, as a crucial conduit of cross-border technology diffusion, is a significant factor influencing R&D activities in an economy. One of the most efficient ways for national economies to overcome the technology gap with their global competitors is to use knowledge spillovers from FDI. In order to improve their technical capacity, countries may encourage companies to invest more in R&D through FDI and absorb technology transfers from it. This paper's objective is to test the influence of FDI net inflows on the R&D investment in the sample of 27 EU countries for the period 2015-2021. To provide an empirical investigation of the influence of FDI on R&D, regression analyses were performed. The results of the analysis confirm the importance of FDI for R&D in the case of EU countries. This study revealed that FDI has a positive influence on R&D. The evaluation of the obtained results can serve as a foundation for drawing further conclusions, contributing to the existing literature and FDI strategy of EU economies.

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