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Foreign direct investment as a driver of industrial development: why is there so little evidence?

  • Narula, Rajneesh


    (J.H. Dunning Centre for International Business, Henley Business School)

This paper examines the role of FDI in promoting industrial development, and raises a rather important question: Why, if FDI is such an important avenue to promote development, is their little evidence on concomitant industrial development in most developing countries? This chapter takes a look at the evidence on FDI and development and explores some of the causes for this ambiguity. The complexities of global value chains and networks have begun to trivialize the simplistic principle that increased MNE activity automatically implies a proportional increase in spillovers and linkages. Policies towards MNEs need to be closely linked and integrated with industrial policy. MNE activity needs to be evaluated by considering the kinds of externalities that are generated; whether and how domestic actors can internalize them, and building up absorptive capacities to achieve this.

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Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 034.

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Date of creation: 2013
Date of revision:
Handle: RePEc:unm:unumer:2013034
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