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Foreign and Domestic Investment: Regional Development or Crowding Out?

Author

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  • Nigel Driffield
  • Dylan Hughes

Abstract

DRIFFIELD N. and HUGHES D. (2003) Foreign and domestic investment: regional development or crowding out?, Reg. Studies 37 , 277-288. This paper tests, at the regional and industry level, the extent to which domestic investment is stimulated or crowded out by inward foreign direct investment. The paper develops a model of domestic investment, based on standard models drawn from macroeconomics and industrial economics. The paper then goes on to show that, at a general level, the "development' or agglomeration hypothesis is confirmed that domestic investment is indeed stimulated by inward investment. However, there is also evidence that, in certain regions, inward investment has crowded out domestic investment. The implications of this from the perspective of regional policy are briefly discussed. DRIFFIELD N. et HUGHES D. (2003) L'investissement direct e tranger et l'investissement interieur: une question d'ame nagement du territoire ou un effet d'evincement?, Reg. Studies 37 , 277-288. Cet article cherche a evaluer au niveau re gional et sur le plan industriel dans quelle mesure l'investissement inte rieur est encourage ou evince par l'investissement direct etranger. L'article construit un modele de l'investissement interieur fonde sur des modeles types tires de la macroeconomie et de l'economie industrielle. L'article montre que globalement les hypotheses de "developpement' ou d'agglomeration confirment que l'investisseent interieur est stimule par l'investissmeent direct etranger. Cependant, il y a aussi des preuves que, dans certaines regions, l' investissement direct etranger evince l'investissment interieur. On discute en bref des retombees sous l'angle de la politique regionale. DRIFFIELD N. und HUGHES D. (2003) Investierungen vom Ausland oder vom Inland: Regionale Entwicklung oder Verdrangung?, Reg. Studies 37 , 277-288. Dieser Aufsatz pruft auf regionaler und Industrieebene, inwieweit Investierungen des eigenen Landes durch Direktinvestitionen vom Ausland angeregt oder verdrangt werden. Der Aufsatz entwickelt ein Modell der Inlandinvestierungen, das sich auf Standardmodelle der Makrookonomie und der sich mit Industrie befassenden Wirtschaftswissenschaft stutzt. Es wird sodann gezeigt, dass auf allgemeiner Ebene die " Entwicklung' oder Ballungshypothek bestatigt wird: dass Inlandinvestierungen tatsachlich durch Investititionen aus dem Ausland angeregt werden. Es gibt jedoch auch Beweise, dass in bestimmten Regionen Investierungen aus dem Ausland solche des Inlands verdrangt haben. Die sich daraus ergebenden Implikationen werden kurz vom Gesichtspunkt der Regionalpolitik aus diskutiert.

Suggested Citation

  • Nigel Driffield & Dylan Hughes, 2003. "Foreign and Domestic Investment: Regional Development or Crowding Out?," Regional Studies, Taylor & Francis Journals, vol. 37(3), pages 277-288.
    • Handle: RePEc:taf:regstd:v:37:y:2003:i:3:p:277-288
    DOI: 10.1080/0034340032000065433
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    Cited by:

    1. Monastiriotis, Vassilis, 2014. "Origin of FDI and domestic productivity spillovers: does European FDI have a 'productivity advantage' in the ENP countries?," LSE Research Online Documents on Economics 55267, London School of Economics and Political Science, LSE Library.
    2. Carlos Azzoni & Aquiles Kalatzis, 2010. "Incorporating demand-side aspects into regional policy: variations in the importance of private investment decision factors across regions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(1), pages 69-82, February.
    3. Hieu Thanh Nguyen & Hiep Ngoc Luu & Ngoc Ha Do, 2021. "The dynamic relationship between greenfield investments, cross-border M&As, domestic investment and economic growth in Vietnam," Economic Change and Restructuring, Springer, vol. 54(4), pages 1065-1089, November.
    4. Monastiriotis, Vassilis, 2016. "Institutional proximity and the size and geography of FDI spillovers: do European firms generate more favourable productivity spillovers in the EU neighbourhood?," LSE Research Online Documents on Economics 66141, London School of Economics and Political Science, LSE Library.
    5. Manop Udomkerdmongkol & Sra Chuenchoksan & Nutthikarn Vorasa-ngasil, 2010. "Investment in Thailand: How to unleash the new investment cycle?," Working Papers 2010-05, Monetary Policy Group, Bank of Thailand.
    6. Morrissey, Oliver & Udomkerdmongkol, Manop, 2012. "Governance, Private Investment and Foreign Direct Investment in Developing Countries," World Development, Elsevier, vol. 40(3), pages 437-445.
    7. Peter Midmore & Dennis Thomas, 2006. "Regional Self-reliance and Economic Development: The Pembrokeshire Case," Local Economy, London South Bank University, vol. 21(4), pages 391-408, November.
    8. Vassilis Monastiriotis, 2016. "Institutional proximity and the size and geography of foreign direct investment spillovers: Do European firms generate more favourable productivity spillovers in the European Union neighbourhood?," Environment and Planning C, , vol. 34(4), pages 676-697, June.
    9. Waqar Ameer & Helian Xu & Kazi Sohag & Syed Hasanat Shah, 2021. "Outflow FDI and Domestic Investment: Aggregated and Disaggregated Analysis," Sustainability, MDPI, vol. 13(13), pages 1-19, June.
    10. Bournakis, Ioannis & Papanastassiou, Marina & Pitelis, Christos, 2015. "Regional Growth and Convergence in the UK: the Role of MNE Subsidiaries and Domestic Firms," MPRA Paper 68090, University Library of Munich, Germany.
    11. Manop Udomkerdmongkol & Oliver Morrissey, 2008. "Political Regime, Private Investment, and Foreign Direct Investment in Developing Countries," WIDER Working Paper Series RP2008-109, World Institute for Development Economic Research (UNU-WIDER).
    12. Constantina Kottaridi, 2005. "The 'core-periphery' pattern of FDI-led growth and production structure in the EU," Applied Economics, Taylor & Francis Journals, vol. 37(1), pages 99-113.
    13. Holger Görg & Oliver Morrissey & Manop Udomkerdmongkol, 2007. "Investment and Sources of Investment Finance in Developing Countries," Discussion Papers 07/16, University of Nottingham, GEP.
    14. Mallick, Hrushikesh & Mahalik, Mantu Kumar & Sahoo, Manoranjan, 2018. "Is crude oil price detrimental to domestic private investment for an emerging economy? The role of public sector investment and financial sector development in an era of globalization," Energy Economics, Elsevier, vol. 69(C), pages 307-324.
    15. Enrico Marelli & Laura Resmini & Marcello Signorelli, 2014. "The Effects Of Inward Fdi On Regional Employment In Europe," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 8(1), pages 1-23, JUNE.
    16. Henry Wai‐Chung Yeung, 2009. "Transnational Corporations, Global Production Networks, and Urban and Regional Development: A Geographer's Perspective on Multinational Enterprises and the Global Economy," Growth and Change, Wiley Blackwell, vol. 40(2), pages 197-226, June.
    17. Ghebrihiwet, Nahom & Motchenkova, Evgenia, 2017. "Relationship between FDI, foreign ownership restrictions, and technology transfer in the resources sector: A derivation approach," Resources Policy, Elsevier, vol. 52(C), pages 320-326.
    18. Rios-Morales, Ruth & Brennan, Louis, 2009. "Ireland's innovative governmental policies promoting internationalisation," Research in International Business and Finance, Elsevier, vol. 23(2), pages 157-168, June.
    19. repec:rdg:wpaper:em-dp2004-04 is not listed on IDEAS
    20. SAGLAM, B. Bayraktar & Yalta, A.Y, 2011. "Dynamic Linkages Among Foreign Direct Investment, Public Investment And Private Investment: Evidence From Turkey," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 11(2).
    21. Rosario Asián Chaves, 2004. "The role of the multinational firms on the producer services sector: repercusions for peripheral regions," ERSA conference papers ersa04p551, European Regional Science Association.

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