Impact Of Foreign Direct Investment On Exports & Innovation: Evidence From Pakistani Firms
Author: Sameen Sarwar

The present study examines the impact of FDI on export performance and innovation behavior of Pakistani firms. The objective of the study is to test the hypothesis whether FDI has an impact on export performance and innovation activities of firms. The current study used “World Enterprise Survey Data (2013)” for empirical analysis and the survey is conducted by World Bank at firm level, which is specifically collected for firms and the survey includes firms’ characteristics, infrastructure of firms, relations of government and business etc. The current study uses two econometric models, one for exports and second for innovation and to estimate exports model, tobit model has been used while for innovation model logit model has been used whereas FDI is measured by foreign owned firms. The results provide evidence in favor of both hypotheses which is FDI affect the firms’ exports and firms’ innovation activity, and we find that the presence of foreign owned firms have positive impact on firms exports and innovation and it effects the host countries exports and innovation activity in direct and indirect ways. The results indicate that foreign owned firms export more than domestic firms, because they have more advanced technology, easy access to international markets, so the presence of foreign firms is beneficial for Pakistan because they contributes in accelerating overall exports and contributes in enhancing innovation activities of firms. The results provide significant implications for government policy makers that government should try hard to improve the image of Pakistan and this can be done by reconstructing the confidence of the foreign investors and to build efficient and effective innovation system, building research & Development institutes. If Pakistan wants to compete in a global market it should have absorbed capacity to use high tech machines and have more high skilled labors, moreover, local or domestic firms should be strengthened to extract favorable results from FDI. Supervisor: Dr. Karim Khan

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Supervisor: Karim Khan

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