Nottingham Centre for Research on
Globalisation and Economic Policy (GEP)

GEP Research Paper 04/11

Foreign Direct Investment and Local Economic Development: Beyond Productivity Spillovers

Holger Görg and Eric Strobl

This paper is forthcoming in Blomström, M., E. Graham and T. Moran (eds): The Impact of Foreign Direct Investment on Development: New Measurements, New Outcomes, New Policy Approaches, Institute for International Economics, Washington DC, 2004.

Abstract

We investigate how multinational companies can foster economic development of the host country at the micro level. Traditionally the empirical literature measuring spillovers to the host economy arising from foreign direct investment has focused on productivity spillovers, i.e., technological externalities. In this paper we emphasise that pecuniary externalities from multinationals can also be important. These can affect plant start-up and post-entry performance in terms of survival and growth. We substantiate this by outlining and discussing previous and providing new empirical results using a comprehensive plant level panel data set for the Republic of Ireland.

Issued in May 2004.

This paper is available in PDF format .

Nottingham Centre for Research on Globalisation and Economic Policy

Sir Clive Granger Building
University of Nottingham
University Park
Nottingham, NG7 2RD

Enquiries: hilary.hughes@nottingham.ac.uk