FDI and regional development policy

Abstract

The transformations in the worldwide division of labour brought about by globalisation and technological change have shown an unintended negative effect, particularly evident in advanced economic systems: uneven spatial distribution of wealth and rising within-country inequality. Although the latter has featured prominently in recent academic and policy debates, in this paper we argue that the relevance of connectivity (here proxied by foreign capital investments, FDI) for regional economic development is still underestimated and suffers from a nation-biased perspective. As a consequence, the relationship between the spatial inequality spurred by the global division of labour and the changes in the structural advantages of regions remains to be fully understood in its implications for economic growth, territorial resilience and industrial policy. Furthermore, even though connectivity entails bi-directional links – i.e. with regions being simultaneously receivers and senders – attractiveness to foreign capital has long been at the centre of policy attention whilst internationalisation through investment abroad has been disregarded, and sometimes purposely ignored, in regional development policy agendas. We use three broad-brushed European case studies to discuss some guiding principles for a place-sensitive regional policy eager to integrate the connectivity dimension in pursuing local economic development and territorial equity.

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Acknowledgements

The author would like to thank Siri Arntzen, Sebastiano Comotti, and Eduardo Ibarra-Olivo for their excellent research assistance; and the Area Editor, Suma Athreye, and two anonymous referees for their truly inspiring suggestions. The research leading to these results received funding from the Economic and Social Research Council/Joint Programming Initiative Urban Europe [Grant Agreement no. ES/M008436/1]; and from the Regional Studies Association Fellowship Grants (FeRSA) 2017. The author remain solely responsible for any errors contained in the paper.

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Correspondence to Simona Iammarino.

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Accepted by Suma Athreye, Area Editor, 13 September 2018. This article has been with the author for two revisions.

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Iammarino, S. FDI and regional development policy. J Int Bus Policy 1, 157–183 (2018). https://doi.org/10.1057/s42214-018-0012-1

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Keywords

  • FDI
  • multinational enterprises
  • regions
  • connectivity
  • regional development policy