Fostering Knowledge and Technology Spillovers of Extractive Industry Investments

The largest component of inward foreign direct investment (FDI) on the African continent is directed at extractive industries. Host countries have increasingly aimed at benefitting from technology and knowledge spillovers from these investments, by imposing local hiring and local procurement rules.

This research project assesses the channels through which knowledge and technology can be transferred and, based on successful country case studies, provides recommendations on how governments can enhance technological spillovers in oil, gas, and mining. The identified channels include the imitation channel, whereby local firms imitate foreign firm technologies or management practices; the labor mobility channel, whereby local firm productivity increases as a result of local firms hiring workers that were trained by foreign multinationals, or when these trained workers start their own businesses; the backward linkage channel, whereby foreign multinationals transfer knowledge and technology to local suppliers in order to enhance the quality of supply; and the export channel, whereby local suppliers use the international network of the multinational companies to access new markets abroad.

The case studies show that the countries that have been most successful at fostering knowledge and technology transfers from multinational extractive industry companies, have been those that put focus on improving local technical skills to increase the absorptive capacity, and by enhancing research collaboration between the multinationals, local knowledge institutions, and local firms.

The findings are summarized in this PowerPoint presentation and this Columbia FDI Perspective.

CCSI is also researching other ways to leverage extractive industries to enhance the economic capability of the host countries. See our pages on Downstream Beneficiation of Extractive Resources, Employment from Mining and Investments in Land for AgricultureLocal Content Laws & Contractual Provisions, and Conceptualizing Economic Linkages to the Resource Sector. Also see our pages on the Mine of the Future to understand the future of linkages under automation, and the impact of trade and investment treaties constraining the policy space on linkage creation.