Foreign direct investment and industrial development

Foreign direct investment (FDI) is widely considered a major source of new useful information for local firms in developing countries. FDI studies attempt to quantify the effect of information spillovers by examining the relationship between the presence of foreign firms and the productivity of local firms. Studies of global value chains (GVC) explore how the transactional relationship between foreign and local firms is related to the information transfer from the former to the latter without undertaking quantitative analyses. I argue that our current knowledge of information transfer is far from adequate and that more useful analyses can be done by combining the strengths of FDI and GVC studies. I also suggest that conscious technology transfer associated with transactions between foreign and local firms, rather than just information spillover is critically important for the development of local firms and industries.