Technology Spillover from Foreign Direct Investment and its relation with the Point of Origin of the Technology; with an Emphasis on Sanction Conditions

Currently many countries around the world attempt to attract foreign capital in order to overcome the lack of internal resources for investment. There are various methods for financing projects which include taking on foreign debts, drawing on domestic savings, attracting foreign investment, etc. However, the characteristic that distinguishes foreign direct investment as a unique alternative in this field is the investor’s participation in the economic activity and sharing in the resulting profits and capital losses.
This study examines the relationship between foreign direct technological investment in Iran with the point origin of the investment: the first block comprising of regional countries with friendly relations (Block 1), and the second block comprising of developed western countries and their allies (Block 2) during the years 1993 to 2022, with particular attention to the conditions imposed by sanctions. This study was based on the Bayesian Vector Autoregression (BVAR) model. According to the obtained results, Iran's human development index (HDI) has a positive relationship with the technology spillover from foreign direct investment, which confirms the important impact of educational investment on the point of origin of this form of foreign direct investment. Moreover, the structural and substantive difference between the foreign direct investment emanating from the two Blocks is evident in terms of technology level, and therefore the impact of sanctions in the short term on technology spillover by foreign direct investment from Block2 countries is greater than that of this form of investment from Block1 countries.