How To Increase Knowledge Spillovers From Foreign Direct Investment In New Eu Member States

The paper provides recommendations to help strengthen knowledge spillovers from foreign direct investment (FDI) in new EU member states from Central and Eastern Europe (CEE). It is based on relevant theoretical considerations and a comprehensive review of policies used to increase FDI spillovers. We propose a greater policy focus on technological aspects that would boost not only the potential for knowledge spillovers, but also domestic firms' absorption capability. One way forward is to improve the coordination of FDI policy with research and development (R&D), innovation and regional policies. In this case, CEE countries could use FDI to realign their national innovation systems with the knowledge that is created and diffused globally.