Inward greenfield FDI and innovation

This paper investigates empirically whether inward greenfield foreign direct investment (FDI) is related to greater sectoral innovative activity in the host narrow territorial units (provinces). We combine several sources of data on Italy to estimate panel count models, regressing the annual number of patents in each province and industry against a series of lagged FDI variables. Our results show that a positive relationship between FDI and local patenting emerges only for services. In particular, we find that larger inward FDI in services positively influences local patenting activity in knowledge-intensive business services. These results are robust to endogeneity and the inclusion of province controls and fixed effects.