The Impact of Foreign Direct Investment on Innovation Performance: Evidence from a Nonlinear ARDL Approach

Abstract

Innovative firms have a distinct competitive advantage and foreign direct investment is an important channel for technological transfers. The aim of this study is to analyse that foreign direct investment coming into Turkey that affects innovation performance of local and foreign investors. Our analysis covers the period of 1984-2017 and the three types of patent applications (residents, non-residents and total) are used as an indication of innovation in our analysis. The nonlinear ARDL model is applied because the impact of positive and negative shocks that caused foreign direct investments on innovation performance decomposes in short and long term. Analysis results indicate that positive and negative shocks experienced FDI have a greater impact on the innovative performance of local investors than foreign investors