What role does foreign direct investment play in international transfer of technology?

What will be an ideal response?

Foreign direct investment is particularly important because it is a major conduit for technology transfer, though in most cases this transfer is not the goal of the foreign firm that is making the investment. When a British company becomes part of a joint venture or opens a factory in China, it brings its know-how and technology to the country. This type of technology transfer enables recipient countries to improve their productivity. Technology transfer creates cross-country interdependence. Countries are not only trading goods and services and having their firms and banks borrow from and lend to each other, but they are also technologically interlinked. Innovations and technological improvements in one country will ultimately improve productivity in all countries. Moreover, the more interaction there is between these countries, in particular through international trade and foreign direct investment, the faster these improvements will migrate from one to the other.