Research and Development Spillovers and the Industrial Development of Iran: A study of the effects Foreign Direct Investment on Industrial Development

Hosseinpoor, Abdolkarim; Baghestani, Masoud; Rahmani, Omolbanin; Darvishi, Ali

Research and Development Spillovers and the Industrial Development of Iran: A study of the effects Foreign Direct Investment on Industrial Development

Document Type : Original Article

Authors

¹ Assistant Professor, Department of Economics, Faculty of Business and Economics, Persian Gulf University, Bushehr, Iran.

² Ph.D., Department of Economics, Faculty of Management and Economics, Islamic Azad University, Science and Research Branch, Tehran, Iran.

³ M.A., Department of Economics, Faculty of Business and Economics, Persian Gulf University, Bushehr, Iran.

Abstract

Striving towards the attainment of continuous and stable development of the industrial sector is contingent upon paying special attention to the factors influencing the growth and development of this sector. Among these factors, the spillover effects of research and development on industrial growth play a prominent role. This study examines the impact of research and development spillovers via the foreign direct investments (FDI) on Iran's industrial development index during the 1360 to 1400 period, using Johansen's method.
The results show that R&D inflows have a positive and significant effect on the value added of the industrial sector; thereby _ assuming other factors to remain constant_ if the index of research and development overlays increases by one percent the value added of the industrial sector will increase by 0.74%. In other words, increasing foreign direct investment, as well as, the arrival and overflow of technology and knowledge and foreign development research makes a positive difference in the development of the industrial sector. R&D and technology advances, reduce costs, increase productivity and expand the industry. New technologies boost the movement of factors of production and lead towards the creation of a greater variety of products. R&D and new technologies allow economic firms to upgrade their productive capacity, in turn leading to capacity growth, lower costs, higher product quality and higher value added in the industry.

Keywords