Analysis of absorptive capacity and foreign direct investment in the productivity of Brazilian municipalities

Abstract Paper aims to measure the impact of Foreign Direct Investment (FDI) and Absorptive Capacity (AC) on productivity in Brazil. Originality no articles were found using the AC as moderator of FDI in Brazil. Research method the Malmquist Index was employed and the Feasible Generalized Least Squares (FGLS) model was chosen, which has greater robustness for correcting the heterocedasticity and autocorrelation. Main findings productivity is more impacted by FDI than Economic Complexity. There is a two-year time lag to the impact of the FDI on productivity. The interaction between FDI and AC becomes positive only when experience and schooling are controlled. The number of PhD employees was better as proxy for AC than R&D workers. Implications for theory and practice there was no positive relationship between productivity and the number of higher education professionals.