Multinational Enterprises and Economic Development in Host Countries: What We Know and What We Don’t Know

The attraction of multinational enterprises (MNEs) has become a key component of development policies, although the net benefits of an FDI-assisted development strategy depends not only on the quantity of FDI but also on the MNE’s investment motivations, the affiliates’ mandate and autonomy, which in turn determine the potential for linkages and spillovers. These effects also depend on the capacity of domestic firms to absorb, internalise and upgrade their knowledge assets. However, the tools to measure linkages and spillovers are increasingly outdated, as ‘FDI’ and ‘MNEs’ are no longer synonyms, since MNEs are increasingly able to control value chains without ownership through equity. This means that objectively judging if MNE activity have a net positive or negative effect, and whether such effects persist or attenuate over time, is increasingly complicated.