Introduction

The central theme of this book is that the behaviour of multinational corporations (MNCs) and their affiliates, and the impact of inward foreign direct investment (FDI) on the host economy, will vary between industries and countries. Multinationals decide their strategies depending on the characteristics of their technologies and products as well as the characteristics and policies of the host countries. The MNCs’ strategic decisions then determine how FDI affects the host economy. We know that some host country governments try simultaneously to influence the behaviour of the foreign MNCs operating in their territory, either directly — through regulations — or indirectly, by affecting the environment in which the MNCs operate. To the extent that these interventions affect the behaviour of the foreign MNCs, they also determine the effects on the host economy. This intricate interplay between firm and host country strategies is that FDI may contribute significantly to growth and development in some circumstances, but may also have insignificant or even negative effects on the local economy in others. Our research agenda since the late 1980s has largely been devoted to attempts to understand this interplay. This volume summarizes the results of these efforts.