Skip to main content
SpringerLink
Log in

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

  • Chapter
  • First Online:
Development Finance

Part of the book series: Palgrave Studies in Impact Finance ((SIF))

Abstract

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 However, the tools to measure linkages and spillovers are increasingly outdated, as ‘FDI’ and ‘MNEs’ are no longer synonyms, since MNEs are increasingly able to control value chains without ownership through equity.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.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 119.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 159.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    The adoption of ‘market-friendly’ policies, including the withdrawal of impediments to free capital movements, were, in fact, an important component of structural adjustment programmes supported by those multilateral agencies (Narula 2014).

  2. 2.

    Reuber et al. (1973) and Lall and Streeten (1977) were among the early studies that analysed the theme through a more conventional economics lens.

  3. 3.

    When recording Balance of Payments statistics, most countries follow the International Monetary Fund’s (IMF) recommendations. The IMF adopts the OECD’s definition: ‘direct investment is a category of cross-border investment associated with a resident in one country having control or significant degree of influence on the management of an enterprise that is resident in another economy’ (IMF 2009, p. 100). According to the IMF’s definition, a significant degree of influence occurs when the foreign investor owns from 10% to 50% of the voting rights. The 10% threshold is taken as an indication of a long-lasting relationship between the investor and the invested entity (OECD 2008).

  4. 4.

    Henceforth referred to as developing economies, unless explicitly stated.

  5. 5.

    UNCTAD continues to classify some high-income economies, such as Hong Kong, Singapore, South Korea and Taiwan, as developing economies, which distorts these figures somewhat.

  6. 6.

    Ideally, inward FDI stock statistics should show the value of the assets owned by non-residents, which should include reinvested earnings and adjust for intra-company flows. However, few countries collect such data. For countries in which these data are missing, international agencies like UNCTAD estimate FDI stocks taking the accumulation of flows over a certain period as a proxy. This practice is imperfect, as it relies on historical prices instead of market value and disregards reinvested earnings by MNEs on host economies. Nonetheless, the figures tend to be more meaningful than FDI flows when discussing development effects.

  7. 7.

    Building on the concept of comparative advantage put forth by David Ricardo, the Heckscher-Ohlin (H-O) model replaced Ricardo’s idea of comparing relative productivity between countries by a prediction of the patterns of international trade based on factor endowments. The model predicts that a country will specialise in products that use their abundant production factors and import those which require factors which are scarce. The model depends on a set of rather restrictive assumptions, such as the adoption of identical technologies by different countries and constant returns to scale, besides factor immobility between countries.

  8. 8.

    Leontief (1953) tested the H-O model with US data, arriving at the striking conclusion that imports were more capital-intensive than exports, even though the US was capital rich.

  9. 9.

    For an overview of that early literature, see Iversen (1935).

  10. 10.

    Buckley (2011) presents a review of the ‘pre-Hymer’ literature on international business, recognising its fragmented nature and the lack of a ‘packaged form’. For a summary of the key theoretical literature on International Business, see Dunning (2001) and Dunning and Lundan (2008).

  11. 11.

    Dunning (1993) actually proposed a longer list of nine motives, but five were labelled secondary by him and ended up being forgotten by the academic community. Obviously, in real world firms often have more than one motive to invest in a specific location (Cuervo-Cazurra and Narula 2015).

  12. 12.

    Cuervo-Cazurra et al. (2015) propose a novel classification of internalisation motives, theoretically grounded on behavioural economics and highlighting the roles of firms’ ownership advantages (or lack of) and home and host countries’ location advantages (or disadvantages). According to the proposed taxonomy, firms expand abroad to: (a) sell more; (b) buy better; (c) upgrade; or (d) escape. The first is close to Dunning’s market-seeking motive while the second combines resource-seeking and efficiency-seeking. The third resembles strategic asset-seeking, while the fourth retrieve one of Dunning’s (1993) lost motives, and is related to avoiding institutional voids or other poor home country conditions.

  13. 13.

    The IDP follows the structuralist tradition in which structural change is a central feature of economic development. Economic structure of countries evolve from a dependency on natural assets – land, mineral deposits, unskilled labour – to an increasing dependence on created assets – capital, technology, skilled labour (Narula 1996). Structural change has to do with: Allocation of labour between agriculture, manufacturing and services; capital, skill and knowledge intensity of production techniques; consumption patterns (subsistence, standardised, differentiated goods); and sources of comparative advantages (natural assets, created assets), among others (Lall 1996). Hence, transition to higher stages of the IDP depends on the development of the infrastructure, human capital and institutions demanded at each level of economic development.

  14. 14.

    For a more detailed description of the IDP stages, see Dunning and Narula (1996).

  15. 15.

    Duran and Ubeda (2001) confirmed that structural variables has a strong explanatory power on inward FDI for developing countries, but not for developed countries. Narula (1996) showed that created assets are important determinants of both inward and outward FDI among developed countries, but not among developing countries.

  16. 16.

    Nevertheless, Narula and Dunning (2010) acknowledge that the oversimplification of the role of policies and their influence on the interaction between location advantages of countries and ownership advantages of firms constitute a weakness of the IDP.

  17. 17.

    Zanfei (2012) criticises the use of the term ‘externality’ for this type of competition effect since the increase in the domestic firm’s efficiency is determined by its own strategy and resource commitment and not by the behaviour of other firms.

  18. 18.

    In the long run this effect should disappear as the least productive firms exit the market.

  19. 19.

    Several empirical studies have confirmed that MNEs pay higher salaries. See Aitken et al. (1996), for Mexico and Venezuela, Lipsey and Sjoholm (2004), for Indonesia, and Chen et al. (2011), for China.

  20. 20.

    Nevertheless, it must be noticed that, in this case, the effect is not likely to squeeze the MNE’s rents, differently to what might occur when the leakage benefits its direct competitors (Kugler 2000).

  21. 21.

    The first studies used cross-sectional data aggregated at sectoral level, finding mostly positive and statistically significant spillovers. Haddad and Harrison (1993) is the first known published study that employed firm-level panel-data – which became the norm in the 2000s – but failed to find significant spillovers. According to some meta-analyses (Gorg and Strobl 2001; Meyer and Sinani 2009), cross-sectional studies tended to overestimate the real horizontal spillovers, since they do not control for possible reverse causality, that is, FDI flowing to more productive industries, and for unobservable heterogeneity among firms.

  22. 22.

    There is some evidence of publication bias (Gorg and Strobl 2001; Havranek and Irsova 2011, 2012), a problem that occur when studies providing the ‘right’ results are more likely to be selected for publication. The selection mechanism is usually guided by the preference of editors and referees for statistically significant results validating hypothesis or theories. According to Havranek and Irsova (2012), findings seems to obey a research-cycle: pioneer studies tend to report large and significant estimates because only strong results convince the journal editors about the relevance of the theme; as time passes, sceptical results become preferred, as they are considered more interesting.

  23. 23.

    Meyer and Sinani (2009) developed some hypotheses linking the occurrence of horizontal spillovers to the level of economic development of the countries. According to their reasoning, in low-income countries technological gap is wide, so domestic firms benefit from FDI since the MNEs would not have incentives to prevent the diffusion of standardised knowledge to firms that does not target the same market (upper-end domestic or export) as them. Moreover, the marginal cost of adopting some processes is low, while the benefits may be large. In middle-income countries, crowding-out is more likely, since the scope for imitation is narrower and concentrated in proprietary assets, and direct competition between MNEs and domestic firms is more probable as their ownership advantages are less different than in the former case, although a gap remains. Finally, in high-income countries, the competition effect is benign, since it forces domestic firms to react to foreign presence by means of improving their capabilities.

  24. 24.

    One of the most widespread criticisms against FDI-assisted development was the inadequacy of the technologies brought in by the MNEs, which were regarded as being excessively capital-intensive for countries where the abundant production factor was unskilled labour (Ahmad 1978; Lall 1978). However, this criticism implicitly supposes that capital-intensive technologies can be adapted relatively easily depending on factor prices conditions, what is rarely true. Furthermore, by doing this, the MNE would be giving up one of its most important ownership advantages, say, superior technology.

  25. 25.

    Countries like South Korea and Taiwan cannot be seen as followers of a purely export-oriented strategy from the 1960s to the 1980s since they maintained a large set of policies very similar to those adopted by Latin American countries at that time (Amsden 1989; Wade 1990).

  26. 26.

    The classification of subsidiaries was done through the application of factor analysis to a questionnaire answered by the firms about the importance they attribute to innovation initiatives. Competence-creating subsidiaries were associated mainly to product diversification, market power expansion and introduction of new products. Competence-exploiting subsidiaries were associated to labour and product cost reduction and flexible production.

  27. 27.

    The term ‘investment’ has different meanings in the System of National Accounts (SNA) and in the Balance of Payments (BP). In the SNA, investment is a synonym of gross fixed capital formation and means the additions (in a given period) to the stock of fixed assets that can be used to produce more goods in the future (UN 2003). Therefore, this concept of investment includes machinery, buildings, roads etc., but excludes non-produced fixed assets such as land. In the BP, investment is a financial flow. The funds may be used to acquire existing assets or to build new ones. Inflows of investment increase the financial liabilities of the country, outflows of investment increases the financial assets of the country. The sum of the assets and liabilities indicates the net investment position of the country.

  28. 28.

    According to the author, this result may had been driven by the prevalence of acquisitions, many of them through privatisation, and the use of the proceeds of the sales in consumption instead of domestic investment, since he had failed to find a positive relationship between FDI and total capital investment (Mencinger 2003).

  29. 29.

    See Blomstrom and Kokko (2003) for a number of convincing arguments against FDI incentives.

References

  • Abraham, F., Konings, J., & Slootmaekers, V. (2010). FDI spillovers in the Chinese manufacturing sector. Economics of Transition, 18(1), 143–182.

    Article  Google Scholar 

  • Agosin, M., & Machado, R. (2005). Foreign investment in developing countries: Does it crowd in domestic investment? Oxford Development Studies, 33(2), 149–162.

    Article  Google Scholar 

  • Ahmad, J. (1978). Import substitution: A survey of policy issues. The Developing Economies, 16(4), 355–372.

    Article  Google Scholar 

  • Aitken, B., & Harrison, A. (1999). Do domestic firms benefit from foreign direct investment? Evidence from Venezuela. American Economic Review, 89(3), 605–618.

    Article  Google Scholar 

  • Aitken, B., Harrison, A., & Lipsey, R. (1996). Wages and foreign ownership: A comparative study of Mexico, Venezuela and the United States. Journal of International Economics, 40(3–4), 345–371.

    Article  Google Scholar 

  • Alfaro, L., & Rodriguez-Clare, A. (2004). Multinationals and linkages: An empirical investigation. Economia, 4(2), 113–169.

    Google Scholar 

  • Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2004). FDI and economic growth: The role of local financial markets. Journal of International Economics, 64(1), 89–112.

    Article  Google Scholar 

  • Alguacil, M., Cuadros, A., & Orts, V. (2011). Inward FDI and growth: The role of macroeconomic and institutional environment. Journal of Policy Modeling, 33(3), 481–496.

    Article  Google Scholar 

  • Altenburg, T. (2000). Linkages and spillovers between transnational corporations and small and medium-sized enterprises in developing countries: Opportunities and best policies. In UNCTAD (Ed.), TNC-SME linkages for development: Issues – experiences – best practices. New York and Geneva: United Nations.

    Google Scholar 

  • Altomonte, C., & Pennings, E. (2009). Domestic plant productivity and incremental spillovers from foreign direct investment. Journal of International Business Studies, 40, 1131–1148.

    Article  Google Scholar 

  • Amsden, A. (1989). Asia’s next giant: South Korea and late industrialization. Oxford and New York: Oxford University Press.

    Google Scholar 

  • Balasubramanyam, V. N., Salisu, M., & Sapsford, D. (1996). Foreign direct investment and growth in EP and IS countries. The Economic Journal, 106(434), 92–105.

    Article  Google Scholar 

  • Barnes, J., & Lorentzen, J. (2006). Learning, upgrading, and innovation in the South African automotive industry. In R. Narula & S. Lall (Eds.), Understanding FDI-assisted development. London: Routledge.

    Google Scholar 

  • Barrios, S., Görg, H., & Strobl, E. (2011). Spillovers through backward linkages from multinationals: Measurement matters! European Economic Review, 55(6), 862–875.

    Article  Google Scholar 

  • Behrman, J. (1972). The role of international companies in Latin America: Autos and petrochemicals. Lexington, MA: Lexington Books.

    Google Scholar 

  • Bell, M., & Marin, A. (2004). Where do foreign direct investment-related technology spillovers come from in emerging economies? An exploration in Argentina in the 1990s. The European Journal of Development Research, 16(3), 653–686.

    Article  Google Scholar 

  • Birkinshaw, J., & Hood, N. (1998). Multinational subsidiary development: Capability evolution and charter change in foreign-owned subsidiary companies. Academy of Management Review, 23, 773–795.

    Google Scholar 

  • Blalock, G., & Simon, D. (2009). Do all firms benefit equally from downstream FDI? The moderating effect of local suppliers’ capabilities on productivity gains. Journal of International Business Studies, 40, 1095–1112.

    Article  Google Scholar 

  • Blomstrom, M., & Kokko, A. (2003). The economics of foreign direct investment incentives. In H. Herrmann & R. Lipsey (Eds.), Foreign direct investment in the real and financial sector of industrial countries. Heidelberg and New York: Springer.

    Google Scholar 

  • Blomstrom, M., & Sjoholm, F. (1999). Technology transfer and spillovers: Does local participation with multinationals matter? European Economic Review, 43, 915–923.

    Article  Google Scholar 

  • Blonigen, B., & Wang, M. (2005). Inappropriate pooling of wealthy and poor countries in empirical FDI studies. In T. H. Moran, E. M. Graham, & M. Blomström (2005) (Eds.), Does foreign direct investment promote development? Washington, DC: Institute for International Economics.

    Google Scholar 

  • Borensztein, E., De Gregorio, J., & Lee, J. W. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45(1), 115–135.

    Article  Google Scholar 

  • Boudier-Bensebaa, F. (2008). FDI-assisted development in the light of the investment development path paradigm: Evidence from central and eastern European countries. Transnational Corporations, 17(1), 37–68.

    Google Scholar 

  • Buckley, P. (2011). The theory of international business pre-Hymer. Journal of World Business, 46, 61–73.

    Article  Google Scholar 

  • Buckley, P., & Casson, M. (1976). The future of the multinational enterprise. London: Macmillan.

    Book  Google Scholar 

  • Buckley, P. J., Clegg, J., & Wang, C. (2007). Is the relationship between inward FDI and spillover effects linear? An empirical examination of the case of China. Journal of International Business Studies, 38(3), 447–459.

    Article  Google Scholar 

  • Cantwell, J., & Mudambi, R. (2005). MNE competence-creating subsidiary mandates. Strategic Management Journal, 26, 1109–1128.

    Article  Google Scholar 

  • Carkovic, M., & Levine, R. (2005). Does foreign direct investment accelerate economic growth? In T. Moran et al. (Eds.), (2005). Does Foreign direct investment promote development? Washington, DC: Institute for International Economics.

    Google Scholar 

  • Castellani, D. (2012). In praise of pecuniary externalities. The European Journal of Development Research, 24(1), 15–19.

    Article  Google Scholar 

  • Caves, R. (1974). Multinational firms, competition, and productivity in host-country markets. Economica, 41(162), 176–193.

    Article  Google Scholar 

  • Chen, Z., Ge, Y., & Lai, H. (2011). Foreign direct investment and wage inequality: Evidence from China. World Development, 39(8), 1322–1332.

    Article  Google Scholar 

  • Chowdhury, A., & Mavrotas, G. (2006). FDI and growth: What causes what? The World Economy, 29(1), 9–19.

    Article  Google Scholar 

  • Chudnovsky, D., López, A., & Rossi, G. (2008). Foreign direct investment spillovers and the absorptive capabilities of domestic firms in the Argentine manufacturing sector (1992–2001). The Journal of Development Studies, 44(5), 645–677.

    Article  Google Scholar 

  • Coase, R. (1937). The nature of the firm. Economica, 4, 386–405.

    Article  Google Scholar 

  • Cohen, W., & Levinthal, D. (1989). Innovation and learning: The two faces of R&D. The Economic Journal, 99, 569–596.

    Article  Google Scholar 

  • Cohen, W., & Levinthal, D. (1990). Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35(1), 128–152.

    Article  Google Scholar 

  • Collinson, S., Narula, R., & Rugman, A. (2016). International business. London: Pearson.

    Google Scholar 

  • Criscuolo, P., & Narula, R. (2008). A novel approach to national technological accumulation and absorptive capacity: Aggregating Cohen and Levinthal. The European Journal of Development Research, 20(1), 56–73.

    Article  Google Scholar 

  • Cuervo-Cazurra, A., & Narula, R. (2015). A set of motives to unite them all? Revisiting the principles and typology of internationalization motives. The Multinational Business Review, 23(1), 2–14.

    Article  Google Scholar 

  • Cuervo-Cazurra, A., Narula, R., & Un, C. A. (2015). Internationalization motives: Sell more, buy better, upgrade and escape. Multinational Business Review, 23(1), 25–35.

    Article  Google Scholar 

  • Driffield, N., & Jindra, B. (2012). Challenging the production function approach to assess the development effects of FDI. The European Journal of Development Research, 24(1), 32–37.

    Article  Google Scholar 

  • Driffield, N., & Love, J. (2007). Linking FDI motivation and host economy productivity effects: Conceptual and empirical analysis. Journal of International Business Studies, 38, 460–473.

    Article  Google Scholar 

  • Dunning, J. (1958). American investment in British manufacturing industry. London: Allen & Unwin.

    Google Scholar 

  • Dunning, J. (1977). Trade, location of economic activity, and the multinational enterprise: A search for an eclectic approach. In P. O. Hesselborn, B. Ohlin, & P. M. Wijkman (Eds.), The international allocation of economic activity. London: MacMillan.

    Google Scholar 

  • Dunning, J. (1981). International production and the multinational enterprise. London: Allen & Unwin.

    Google Scholar 

  • Dunning, J. (1993). Multinational enterprises and the global economy. Cheltenham: Edward Elgar.

    Google Scholar 

  • Dunning, J. (2001). The key literature on IB activities: 1960–2000. In A. Rugman & T. Brewer (Eds.), The Oxford handbook of international business. Oxford: Oxford University Press.

    Google Scholar 

  • Dunning, J., & Lundan, S. (2008). Multinational enterprises and the global economy. Cheltenham: Edward Elgar.

    Google Scholar 

  • Dunning, J., & Narula, R. (1995). The R&D activities of foreign firms in the United States. International Studies of Management & Organization, 25(1–2), 39–74.

    Article  Google Scholar 

  • Dunning, J., & Narula, R. (1996). The investment development path revisited: Some emerging issues. In J. Dunning & R. Narula (Eds.), Foreign direct investment and governments: Catalysts for economic restructuring. Basingstoke: Edward Elgar.

    Google Scholar 

  • Duran, J., & Ubeda, F. (2001). The investment development path: A new empirical approach and some theoretical issues. Transnational Corporations, 10(2), 1–34.

    Google Scholar 

  • Findlay, R. (1978). Relative backwardness, direct foreign investment, and the transfer of technology: A simple dynamic model. Quarterly Journal of Economics, 92(1), 1–16.

    Article  Google Scholar 

  • Flôres Jr, R. G., Fontoura, M. P., & Guerra Santos, R. (2007). Foreign direct investment spillovers in Portugal: Additional lessons from a country study. The European Journal of Development Research, 19(3), 372–390.

    Article  Google Scholar 

  • Fosfuri, A., Motta, M., & Rønde, T. (2001). Foreign direct investment and spillovers through workers’ mobility. Journal of International Economics, 53(1), 205–222.

    Article  Google Scholar 

  • Girma, S., Gong, Y., Görg, H., & Lancheros, S. (2015). Estimating direct and indirect effects of foreign direct investment on firm productivity in the presence of interactions between firms. Journal of International Economics, 95(1), 157–169.

    Article  Google Scholar 

  • Giroud, A. (2003). Transnational corporations, technology and economic development: Backward linkages and knowledge transfer in South East Asia. Cheltenham: Edward Elgar.

    Google Scholar 

  • Giroud, A. (2007). MNE vertical linkages: The experience of Vietnam after Malaysia. International Business Review, 16, 159–176.

    Article  Google Scholar 

  • Globerman, S., & Shapiro, D. (2002). Global foreign direct investment flows: The role of governance infrastructure. World Development, 30(11), 1899–1919.

    Article  Google Scholar 

  • Gorg, H., & Strobl, E. (2001). Multinational companies and productivity spillovers: A meta-analysis. The Economic Journal, 111, 723–739.

    Article  Google Scholar 

  • Gorg, H., & Strobl, E. (2005). Spillovers from foreign firms through worker mobility: An empirical investigation. Scandinavian Journal of Economics, 107(4), 693–709.

    Article  Google Scholar 

  • Ha, Y., & Giroud, A. (2015). Competence-creating subsidiaries and FDI technology spillovers. International Business Review, 24, 605–614.

    Article  Google Scholar 

  • Haddad, M., & Harrison, A. (1993). Are there productivity spillovers from direct foreign investment? Evidence from panel data from Morocco. Journal of Development Economics, 42, 51–74.

    Article  Google Scholar 

  • Hansen, M., & Schaumburg-Muller, H. (Eds.) (2006). Transnational corporations and local firms in developing countries: Linkages and upgrading. Copenhagen: Copenhagen Business School.

    Google Scholar 

  • Havranek, T., & Irsova, Z. (2011). Estimating vertical spillovers from FDI: Why results vary and what the true effect is. Journal of International Economics, 85(2), 234–244.

    Article  Google Scholar 

  • Havranek, T., & Irsova, Z. (2012). Publication bias in the literature on foreign direct investment spillovers. Journal of Development Studies, 48(10), 1375–1396.

    Article  Google Scholar 

  • Hennart, J. (2001). Theories of the multinational enterprise. In A. Rugman & T. Brewer (Eds.), The Oxford handbook of international business. Oxford: Oxford University Press.

    Google Scholar 

  • Herzer, D., & Klasen, S. (2008). In search of FDI-led growth in developing countries: The way forward. Economic Modelling 25(5), 793–810.

    Article  Google Scholar 

  • Hirschman, A. (1958). The strategy of economic development. New Haven: Yale University Press.

    Google Scholar 

  • Hymer, S. (1960). The international operations of national firms: A study of direct foreign investment. Cambridge, MA and London: MIT Press (published in 1976).

    Google Scholar 

  • IMF – International Monetary Fund. (2009). Balance of payments and international investment position manual: Sixth edition. Washington, DC: IMF.

    Google Scholar 

  • Irsova, Z., & Havranek, T. (2013). Determinants of horizontal spillovers from FDI: Evidence from a large meta-analysis. World Development, 42, 1–15.

    Article  Google Scholar 

  • Iversen, C. (1935). Aspects of the theory of international capital movements. Copenhagen: Levin & Munksgaard.

    Google Scholar 

  • Javorcik, B., & Spatareanu, M. (2008). To share or not to share: Does local participation matter for spillovers from foreign direct investment? Journal of Development Economics, 85, 194–217.

    Article  Google Scholar 

  • Jindra, B., Giroud, A., & Scott-Kennel, J. (2009). Subsidiary roles, vertical linkages and economic development: Lessons from transition economies. Journal of World Business, 44(2), 167–179.

    Article  Google Scholar 

  • Kosova, R. (2010). Do foreign firms crowd out domestic firms? Evidence from the Czech republic. The Review of Economics and Statistics, 92(4), 861–881.

    Article  Google Scholar 

  • Krugman, P. (2000). Fire-sale FDI. In S. Edwards (Ed.), Capital flows and the emerging economies: Theory, evidence, and controversies. Chicago: University of Chicago Press.

    Google Scholar 

  • Kugler, M. (2000). The diffusion of externalities from foreign direct investment: Theory ahead of measurement. Southampton: University of Southampton, Discussion Papers in Economics and Econometrics.

    Google Scholar 

  • Laborda Castillo, L., Sotelsek Salem, D., & Moreno, J. D. J. (2014). Foreign direct investment and productivity spillovers: Firm-level evidence from Chilean industrial sector. Latin American Business Review, 15(2), 93–122.

    Article  Google Scholar 

  • Lall, S. (1978). Transnationals, domestic enterprises, and industrial structure in host LDCs: A survey. Oxford Economic Papers, 30(2), 217–248.

    Article  Google Scholar 

  • Lall, S. (1980). Vertical inter-firm linkages in LDCs: An empirical study. Oxford Bulletin of Economics and Statistics, 42(3), 203–226.

    Article  Google Scholar 

  • Lall, S. (1996). The investment development path: Some conclusions. In J. Dunning & R. Narula (Eds.), Foreign direct investment and governments: Catalysts for economic restructuring. London and New York: Routledge.

    Google Scholar 

  • Lall, S., & Streeten, P. (1977). Foreign investment, transnationals and developing countries. London: Macmillan.

    Book  Google Scholar 

  • Leontief, W. (1953). Domestic production and foreign trade: The American capital position re-examined. Proceedings of the American Philosophical Society, 97(4), 332–349.

    Google Scholar 

  • Li, X., & Liu, X. (2005). Foreign direct investment and economic growth: An increasingly endogenous relationship. World Development, 33(3), 393–407.

    Article  Google Scholar 

  • Lin, P., & Saggi, K. (2005). Multinational firms and backward linkages: A critical survey and a simple model. In T. H. Moran, E. M. Graham, & M. Blomström (Eds.), Does foreign direct investment promote development? Washington: DC: Institute for International Economics.

    Google Scholar 

  • Lipsey, R., & Sjoholm, F. (2004). Foreign direct investment, education and wages in Indonesian manufacturing. Journal of Development Economics, 73, 415–422.

    Article  Google Scholar 

  • Lipsey, R. E., Feenstra, R. C., Hahn, C. H., & Hatsopoulos, G. N. (1999). The role of foreign direct investment in international capital flows. In M. Feldstein (Ed.), International capital flows. Chicago: University of Chicago Press.

    Google Scholar 

  • Lorentzen, J. (2005). The absorptive capacities of South African automotive component suppliers. World Development, 33(7), 1153–1182.

    Article  Google Scholar 

  • Madhok, A., & Keyhani, M. (2012). Acquisitions as entrepreneurship: Asymmetries, opportunities, and the internationalization of multinationals from emerging economies. Global Strategy Journal, 2(1), 26–40.

    Article  Google Scholar 

  • Marin, A., & Bell, M. (2006). Technology spillovers from foreign direct investment (FDI): The active role of MNC subsidiaries in Argentina in the 1990s. Journal of Development Studies, 42(4), 678–697.

    Article  Google Scholar 

  • Marin, A., & Sasidharan, S. (2010). Heterogeneous MNC subsidiaries and technological spillovers: Explaining positive and negative effects in India. Research Policy, 39, 1227–1241.

    Article  Google Scholar 

  • Markusen, J., & Venables, A. (1999). Foreign direct investment as a catalyst for industrial development. European Economic Review, 43, 335–356.

    Article  Google Scholar 

  • Mencinger, J. (2003). Does foreign direct investment always enhance economic growth? Kyklos, 56(4), 491–508.

    Article  Google Scholar 

  • Meyer, K., & Sinani, E. (2009). When and where does foreign direct investment generate positive spillovers? A meta-analysis. Journal of International Business Studies, 40, 1075–1094.

    Article  Google Scholar 

  • Morrissey, O. (2012). FDI in sub-Saharan Africa: Few linkages, fewer spillovers. European Journal of Development Research, 24(1), 26–31.

    Article  Google Scholar 

  • Nair-Reichert, U., & Weinhold, D. (2001). Causality tests for cross-country panels: A new look at FDI and economic growth in developing countries. Oxford Bulletin of Economics and Statistics, 63(2), 153–171.

    Article  Google Scholar 

  • Narula, R. (1996). Multinational investment and economic structure: Globalisation and competitiveness. London and New York: Routledge.

    Google Scholar 

  • Narula, R. (2014). Foreign direct investment as a driver of industrial development: Why is there so little evidence? In R. Van Tulder, A. Verbeke, & R. Strange (Eds.), International business and sustainable development. Bingley: Emerald.

    Google Scholar 

  • Narula, R., & Driffield, N. (2012). Does FDI cause development? The ambiguity of the evidence and why it matters. The European Journal of Development Research, 24(1), 1–7.

    Article  Google Scholar 

  • Narula, R., & Dunning, J. (2000). Industrial development, globalization and multinational enterprises: New realities for developing countries. Oxford Development Studies, 28(2), 141–167.

    Article  Google Scholar 

  • Narula, R., & Dunning, J. (2010). Multinational enterprises, development and globalization: Some clarifications and a research agenda. Oxford Development Studies, 38(3), 263–287.

    Article  Google Scholar 

  • Narula, R., & Marin, A. (2003) Foreign direct investment spillovers, absorptive capacities and human capital development: Evidence from Argentina. Geneva: International Labour Office Working Paper no. 96.

    Google Scholar 

  • Noorbakhsh, F., & Paloni, A. (2001). Human capital and FDI inflows to developing countries: New empirical evidence. World Development, 29(9), 1593–1610.

    Article  Google Scholar 

  • OECD – Organization for Economic Cooperation and Development (2008) OECD benchmark definition of foreign direct investment: (fourth edition). Paris: OECD Publishing.

    Google Scholar 

  • Pearce, R. (2001). Multinationals and industrialisation: The bases of ʻinward investmentʼ policy. International Journal of the Economics of Business, 8(1), 51–73.

    Article  Google Scholar 

  • Poole, J. (2013). Knowledge transfers from multinational to domestic firms: Evidence from worker mobility. The Review of Economics and Statistics, 95(2), 393–406.

    Article  Google Scholar 

  • Reuber, G. (1973). Private foreign investment in development. Oxford: Clarendon Press.

    Google Scholar 

  • Rodriguez-Clare, A. (1996). Multinationals, linkages, and economic development. American Economic Review, 86(4), 852–873.

    Google Scholar 

  • Singer, H. (1970). Dualism revisited: A new approach to problems of the dual society in developing countries. Journal of Development Studies, 7(1), 60–75.

    Article  Google Scholar 

  • Todo, Y., & Miyamoto, K. (2006). Knowledge spillovers from foreign direct investment and the role of local R&D activities: Evidence from Indonesia. Economic Development and Cultural Change, 55(1), 173–200.

    Article  Google Scholar 

  • UN – United Nations. (2003). National accounts: A practical introduction. New York: United Nations.

    Google Scholar 

  • UNCTAD – United Nations Conference on Trade and Development. (2001). World investment report 2001: Promoting linkages. United Nations: New York and Geneva.

    Google Scholar 

  • UNCTAD – United Nations Conference on Trade and Development. (2011). World investment report 2011: Non-equity modes of international production and development. United Nations: New York and Geneva.

    Google Scholar 

  • UNCTAD – United Nations Conference on Trade and Development. (2015). World investment report 2015: Reforming international investment governance. United Nations: New York and Geneva.

    Google Scholar 

  • Wade, R. (1990). Governing the market: Economic theory and the role of government in East Asian industrialization. Princeton: Princeton University Press.

    Google Scholar 

  • Walsh, J., & Yu, J. (2010) Determinants of Foreign direct investment: A sectoral and institutional approach. Washington, DC: IMF (Working Paper 10/187).

    Google Scholar 

  • Wang, C., & Yu, L. (2008). Do spillover benefits grow with rising foreign direct investment? An empirical examination of the case of China. Applied Economics, 39(3), 397–405.

    Article  Google Scholar 

  • Wang, M., & Wong, S. (2009a). Foreign direct investment and economic growth: The growth accounting perspective. Economic Enquiry, 47(4), 701–710.

    Article  Google Scholar 

  • Wang, M., & Wong, S. (2009b). What drives economic growth? The case of cross-border M&A and greenfield FDI activities. Kyklos, 62(2), 316–330.

    Article  Google Scholar 

  • Zanfei, A. (2012). Effects, not externalities. The European Journal of Development Research, 24(1), 8–14.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Henley Business School, University of Reading, Reading, UK

    Rajneesh Narula

  2. Henley Business School, University of Reading, Reading, UK

    André Pineli

Authors
  1. Rajneesh Narula
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. André Pineli
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Rajneesh Narula .

Editor information

Editors and Affiliations

  1. The University of Liverpool , Liverpool, United Kingdom

    Gianluigi Giorgioni

Copyright information

© 2017 The Author(s)

About this chapter

Cite this chapter

Narula, R., Pineli, A. (2017). Multinational Enterprises and Economic Development in Host Countries: What We Know and What We Don’t Know. In: Giorgioni, G. (eds) Development Finance. Palgrave Studies in Impact Finance. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-58032-0_6

Download citation

  • DOI: https://doi.org/10.1057/978-1-137-58032-0_6

  • Published:

  • Publisher Name: Palgrave Macmillan, London

  • Print ISBN: 978-1-137-58031-3

  • Online ISBN: 978-1-137-58032-0

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation