QUALITY OF FOREIGN DIRECT INVESTMENT, KNOWLEDGE SPILLOVERS AND HOST COUNTRY PRODUCTIVITY

ii The existing research on knowledge-spillovers from foreign direct investment (FDI) has invariably treated all foreign firms as homogeneous and of equal importance for the development of host countries. However, in actual market situations foreign firms are basically non-homogeneous and of varying qualities as far as the potential for knowledge-spillover are concerned. Foreign firms differ in terms of export-orientation, intensity to undertake local R&D activities, vertical integration, generating demands for local raw materials, and entry modes. Non-inclusion of such quality dimensions of FDI into the spillover analysis is certainly an important limitation of the existing literature. This paper has explored different notion of FDI quality and argued that it should be included in the empirical studies on spillover analysis. This paper has develop an empirical framework for inclusion of quality dimensions in exploring FDI-related spillovers on host country productivity and propose a percentile criterion to distinguish between low and high quality FDI firms in empirical exercises. Since ther