Lessons from Ireland and Costa Rica

Abstract

As the twenty-first century begins, a large and growing number of developing (and developed) countries are competing fiercely for foreign direct investment. They hope that FDI will provide a major impetus for economic development by increasing total investment and by generating positive spillovers through the transfer of technology, marketing, and business practices. The realization of such expectations is not automatic. Developing countries will only reap long-term benefits from FDI if there is a coincidence between TNCs’ strategic global interests and host country capabilities, at a particular point in time as well as over the long term. In this book, I have focused on high-tech FDI and small latecomers, because high-tech FDI offers the greatest potential for industrial advancement for small countries whose small market size imposes constraints on indigenously grown industrialization. I offered a conceptual framework for analyzing these contingencies and examined how they played out in the cases of Ireland and Costa Rica. Both are small countries that have been successful in attracting high-tech FDI. But they were at different levels of development when they began to pursue high-tech FDI, and have experienced very different growth outcomes to date.