|
Chapter Geography, Location, and Strategy 2017 Multinational Activity in Emerging Markets: How and When Does Foreign Direct Investment Promote Growth? |
Among the prominent economic trends in recent decades is the exponential increase in flows of goods and capital driven by technological progress and a falling number of restrictions. A key driver of this phenomenon has been the cross-border production, foreign investment, and trade of both final and intermediate goods by multinational corporations. Research has sought to understand how foreign direct investment (FDI) affects host economies. This paper reviews the main theories and empirical evidence of two streams of literature: the mechanisms by which multinational activity might create positive effects and externalities to countries and the role of complementary local conditions, also known as “absorptive capacities,” that allow a country to reap the benefits of FDI paying particular attention to the role of factor markets, reallocation effects, and the linkages generated between foreign and domestic firms. The survey focuses mainly on work related to developing countries.
Keywords: foreign direct investment; multinational activity; Growth; Spillovers; complementarities; Foreign Direct Investment; Emerging Markets; Growth and Development; Multinational Firms and Management;
Alfaro, Laura. "Multinational Activity in Emerging Markets: How and When Does Foreign Direct Investment Promote Growth?" In Geography, Location, and Strategy. Vol. 36, edited by Juan Alcácer, Bruce Kogut, Catherine Thomas, and Bernard Yin Yeung, 429–462. Advances in Strategic Management. Emerald Publishing Limited, 2017.
