Local Discoveries and Technological Relatedness: the Role of Foreign Firms

Abstract

 

We explore the role of intra- and extra-regional product-specific capabilities in the introduction of local discoveries - products new to the firm and to the firm's local market - by Turkish manufacturing firms. We find that product discoveries in a NUTS3 region are favoured by their technological proximity to co-located foreign firms. Technological proximity to co-located domestic firms and to the local import basket does not play any role. Local discoveries' high intensity in novel and exclusive capabilities which foreign affiliates bring to the local economy drives our findings. The latter further suggest the relevance of personal interactions in knowledge transfers. Finally, the importance of knowledge spilling from foreign firms depends on the extent of local firms' absorptive capacity, of foreign affiliates'  insidership in the local market and of their product-specific knowledge ownership advantage.