Innovation as a Driver of Absorptive Capacity from Foreign Direct Investment in Spanish Manufacturing Firms

This article proposes a new model for analyzing innovation as a driver of absorptive capacity of spillovers from foreign direct investment (FDI) upon technical progress in Spanish manufacturing firms. So, we identify and justify innovation factors that determine the absorptive capacity from FDI upon technical progress. We group into four basic categories of innovation factors: research and development (R&D) activities and expenditures, R&D results, internal organization of innovation and external relationships of innovation. As a result of this study based on a panel data at the firm level, we demonstrate that local firms with process innovations and R&D activities (specially in internal activities) are in a better condition to absorb the spillovers from FDI. While, the obtaining of public finance destined for R&D is worse for such absorptive capacity.