R&D and Productivity Spillovers from FDI: Evidence from the Thai Manufacturing Industry

Research and development (R&D) as well as foreign direct investment (FDI) have been found to increase the Thai manufacturing sector's productivity. R&D in Thai plants may enhance the productivity spillovers from FDI. The aforementioned effect, however, has never been studied in Thailand. This study, therefore, aims to assess the impact of R&D on productivity spillovers from FDI in Thailand's manufacturing sector. This study utilizes data from Thailand's Industrial Census, which also gathered data on R&D activities. The regression results not only indicate that R&D increases the labor productivity of a plant, but also indicate that the R&D enhances the positive spillovers from FDI. In other words, a plant with R&D tends to gain benefits from spillovers more than one without R&D. To boost productivity, the government may encourage businesses, especially in an industry with a high foreign presence, to engage in R&D. Also, the government may want to attract more FDI into an industry where domestic firms actively engage in R&D.