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

Author

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  • Narula, Rajneesh

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

Abstract

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.

Suggested Citation

  • Narula, Rajneesh, 2013. "Foreign direct investment as a driver of industrial development: why is there so little evidence?," MERIT Working Papers 034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2013034
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    File URL: https://www.merit.unu.edu/publications/wppdf/2013/wp2013-034.pdf
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    More about this item

    Keywords

    MNEs; absorptive capabilities; motives; IDP; services; developing countries;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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