Quaderni del Dipartimento di Scienze Economiche e Matematico-Statistiche dell'Università del Salento - Collana di Economia

This article uses stochastic frontier methodology to analyse foreign direct investment and imported capital goods as channels for increased efficiency in less developed countries. Empirical investigation reveals that both contribute substantially to greater efficiency. However, there is an important difference: the article demonstrates that the general and disembodied knowledge diffusion effects of foreign direct investment are more growth enhancing than the more localised, embodied knowledge impact of imported capital goods.