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Linking FDI motivation and host economy productivity effects: conceptual and empirical analysis

Listed author(s):
  • Nigel Driffield

    (Economics and Strategy Group, Aston Business School, Aston University, Birmingham, UK)

  • James H Love

    (Economics and Strategy Group, Aston Business School, Aston University, Birmingham, UK)

We develop a taxonomy that relates foreign direct investment (FDI) motivation (technology- and cost-based) to its anticipated effects on host countries’ domestic productivity. We then empirically examine the effects of FDI into the United Kingdom on domestic productivity, and find that different types of FDI have markedly different productivity spillover effects, which are consistent with the conceptual analysis. The UK gains substantially only from inward FDI motivated by a strong technology-based ownership advantage. As theory predicts, inward FDI motivated by technology-sourcing considerations leads to no productivity spillovers. Journal of International Business Studies (2007) 38, 460–473. doi:10.1057/palgrave.jibs.8400268

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Article provided by Palgrave Macmillan & Academy of International Business in its journal Journal of International Business Studies.

Volume (Year): 38 (2007)
Issue (Month): 3 (May)
Pages: 460-473

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Handle: RePEc:pal:jintbs:v:38:y:2007:i:3:p:460-473
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