Beyond Capital : Monitoring Development Outcomes of Multinational Enterprises

This study presents a novel set of indicators on outcomes of foreign direct investment spanning 63 developing countries and 10 areas that matter for development. Building on decade-long data collection by the World Bank Enterprise Surveys, the indicators highlight systematic differences between foreign multinational enterprises and domestic firms across countries in competitiveness outcomes such as productivity, innovation, export orientation, as well as the extent to which they promote inclusiveness through job creation, gender empowerment, or supply linkages. Although there appears to be no striking trade-off between competitiveness and inclusiveness of foreign multinational enterprises, their premia differ substantially across regions and income groups. Differences in some key drivers of competitiveness, such as productivity, innovation, and skills transfer, appear to be increasing with income, although premia in most outcomes are stronger in lower-middle-income or low-income markets, highlighting the relevance of foreign multinational enterprises for socioeconomic progress in these contexts. Moreover, outcomes of foreign multinational enterprises in areas such as export orientation, skills transfer, and physical capital accumulation are more consistent across countries, whereas in other areas the outcomes display wide variation, suggesting potentially higher sensitivity to investor motivations, sectors, seasonal trends, and business environments. Policy efforts should take these differences into account, to devise investment strategies that not only seek to increase capital flows, but also enhance the benefits that could be derived from them.