Many existing works using firm-level data sets have examined whether or not knowledge spills over from MNEs to domestically owned firms in a less developed country, but the literature has not come to a general consensus on the presence of spillovers. A possible reason for the mixed results is that they do not adequately address domestic and foreign efforts for active diffusion. The present paper thus incorporates R&D activities and human resource development conducted by MNEs and domestic firms to investigate whether these activities enhance knowledge diffusion from MNEs, using establishment-level panel data for the Indonesian manufacturing sector. We find that R&D activities and human resource development conducted by MNEs stimulate knowledge diffusion from MNEs to domestic firms, while knowledge diffusion from MNEs without such activities is absent. Moreover, R&D activities by a domestic firm are also found to promote knowledge diffusion from MNEs to the firm, although this ...