FDI knowledge spillovers and host government policies: the Iranian experience

The purpose of this paper is aimed at analysing the influence of the host government policies on foreign direct investment (FDI) knowledge spillovers.

Starting from the analysis of the literature, the paper has introduced a theoretical model that has been illustrated analyzing the Iranian case.

Governments can promote the realisation of knowledge spillovers only if they create the conditions for improving the absorptive capacity of local firms and the connections between local firms and foreign investors (strategic approach). Moreover, in many emerging countries, governments are directly involved in relationships with foreign investors through state‐owned companies. According to this, the Iranian case shows how the direct government involvement, if it is matched with a strategic approach, can encourage the realization of FDI knowledge spillovers.

The paper presents some limitations: other quadrants of the proposed model need to be further explored adopting other case studies; moreover, the Iranian case can be examined more in deep.

From a policymaker's point of view, the paper is an useful tool because it gives them many suggestions about what FDIs attraction policies have to be adopted in order to realize FDI knowledge spillovers.

From a theoretical point of view, the paper gives a contribution to the literature on FDI spillovers highlighting the direct relationships between host government policies and FDI knowledge spillovers, especially revaluing the opportunities stemming from a direct government intervention. Moreover, this paper contributes to increase the knowledge on the Iranian context often neglected by international management studies.