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  • 2017
  • Chapter
  • Geography, Location, and Strategy

Multinational Activity in Emerging Markets: How and When Does Foreign Direct Investment Promote Growth?

By: Laura Alfaro
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Abstract

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

Citation

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.
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About The Author

Laura Alfaro

General Management
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  • On the Direct and Indirect Real Effects of Credit Supply Shocks By: Laura Alfaro, Manuel García-Santana and Enrique Moral-Benito
  • Latam Airlines and COVID-19: Seeking Bankruptcy Protection in the United States By: Laura Alfaro
  • Reserve Accumulation, Sovereign Debt, and Exchange Rate Policy By: Laura Alfaro and Fabio Kanczuk
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