Knowledge Spillovers of Foreign-invested Firms: Innovation Performance of Industry Clusters in Korea

Abstract

This study aims to investigate whether the presence of foreign-invested firms in domestic industry clusters actually causes a spillover effect by examining the mechanism of the agglomeration effect in the industry cluster. Specifically, this study suggests that the number of non-market institutions near a cluster and a cluster’s productivity have a positive moderating effect on the relationship between the ratio of foreign-invested firms in the cluster and innovation performance. The statistical results support our arguments. First, the ratio of foreign-invested firms in the cluster has a positive impact on the innovation performance of the cluster. Second, the cluster’s productivity showed a positive moderating effect on the relationship between the ratio of foreign-invested firms in the cluster and the cluster’s innovation performance. Third, the number of non-market institutions positively moderate the relationship between the ratio of foreign-invested firms in the cluster and the cluster’s innovation performance.