Local discoveries and technological relatedness: the role of MNEs, imports and domestic capabilities

We explore the role of intra- and extra-regional product-specific capabilities in the introduction of local discoveries—products new to the firm and to its local market—by Turkish manufacturing firms. We find that product discoveries in a NUTS3 region are favoured by their technological proximity to the product mix of co-located foreign firms. Proximity to co-located domestic firms and local imports does not play any role. The high intensity of local discoveries in novel and exclusive capabilities which foreign affiliates bring into the local economy drives our findings. Finally, we show that the importance of knowledge spilling from foreign affiliates depends on their insidership in the local market, on their product-specific knowledge advantage and on local firms’ absorptive capacity.