Foreign Direct Investment and Technological Upgrading among Manufacturing Firms in Ghana

r4d Working Paper 2017/01 by Abena D. Oduro, Agyapomaa Gyeke-Dako, Priscilla Twumasi Baffour and F. Ebo Turkson

ABSTRACT: We investigate whether foreign owned firms are more likely than domestic firms to introduce new products and processes. This issue is particularly relevant given the importance that policy in Ghana places on the link between FDI and innovation. The majority of manufacturing firms that innovate tend to simultaneously introduce new products and new processes. Using a bivariate probit model we find that wholly-owned and partially-owned foreign firms are more likely than domestic firms to introduce new products, however partially-owned foreign firms are more likely than domestic firms to process innovate whilst there is no difference between wholly owned and domestic firms in the probability of process innovation. In addition we find a positive relationship between research and development and both process and product innovation.