Taking stock of firm-level and country-level benefits from foreign direct investment

Abstract

The empirical literature has not reached a conclusion as to whether foreign direct investment (FDI) yields spillovers when the host economies are emerging. Instead, the results are often viewed as conditional. For macro studies, this means that the existence and scale of spillover effects is contingent on the levels of institutional, financial or human capital development attained by the host economies. For enterprise level studies, conditionality relates to the type of inter-firm linkages; forwards, backwards, or horizontal. In this paper, we conduct a systematic meta-analysis on emerging economies to summarize these effects and throw light on the strength and heterogeneity of these conditionalities. We propose a new methodological framework that allows country-and firm-level effects to be combined. We handcollected information from 175 studies and around 1100 estimates in Eastern Europe, Asia, Latin America and Africa from 1940 to 2008. The two main findings are that: (a) "macro" effects are much larger than enterprise-level ones, by a factor of at least six; and (b) the benefits from FDI into emerging economies are substantially less "conditional" than commonly thought. Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth, European Economic Review, 48(2), 285-306.

Country-specific determinants of FDI inflows to the MENA region

“…More insight into the investment environment of MENA countries could be drawn from studying the spillover effects of FDI in the region. In a recent review article taking stock of the benefits of FDI in emerging markets, Bruno et al (2018) have found that FDI spillover effects are significantly positive and much larger at the country level than at the firm level, and that these effects depend on the levels of institutional, financial and human capital development reached by the host country. In this perspective, it would be enlightening to see whether the country-level benefits of FDI affect the MENA region and to what extent they are contingent on countries' economic, political and social characteristics.…”

Chinese investments abroad: examining the spillover effects in Eastern and Central Europe

“…The Organization for Economic Cooperation and Development OECD (2002) points to four channels through which FDI inflows can have an impact on the local economy: International trade : As FDI further integrates the local economy into the global economy, this provides domestic firms greater access and exposure to international markets (Bruno et al , 2018). Technology transfer : As foreign companies use local suppliers in their production processes and raise the efficiency and technology level of other related firms (Spencer, 2008).…”

“…International trade : As FDI further integrates the local economy into the global economy, this provides domestic firms greater access and exposure to international markets (Bruno et al , 2018).…”

Financial foreign direct investment and the economic performance of developing countries

“…Foreign direct investment (FDI) is often singled out. These flows are the most stable and they are expected to contribute not only to the capital stock but also to the total factor productivity of their host countries (Bruno et al, 2018;Demena & van Bergeijk, 2017;Kose, Prasad, Rogoff, & Wei, 2009;Navaretti & Venables, 2005). 2 FDI may also improve local financial development which, in turn, tends to be associated with economic development (Arestis et al, 2015;Valickova et al, 2015).…”

“…Foreign direct investment (FDI) is often singled out. These flows are the most stable and they are expected to contribute not only to the capital stock but also to the total factor productivity of their host countries (Bruno et al, 2018; Demena & van Bergeijk, 2017; Kose, Prasad, Rogoff, & Wei, 2009; Navaretti & Venables, 2005). 2…”