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Improving the absorptive capacity of regions and organisations is a major mechanism for accelerating innovation, raising productivity, and economic growth. The present World Bank working paper discusses trade flows, foreign direct investment (FDI), research and development (R&D), and labor mobility and training as key processes for knowledge absorption.

Particularly interesting is Chapter 3 on the links among knowledge absorption and spillovers fromFDI. I quote “Empirical studies generally find strong, robust effects of foreign ownership on the productivity of wholly or partially owned foreign subsidiaries. In other words, firms with some level of foreign ownership are more productive and technology intensive than are purely domestic firms.

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