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Redefining Foreign Direct Investment Policy: A Two Dimensional Framework

Author

Listed:
  • Filippov, Sergey

    (UNU-MERIT)

  • Costa, Ionara

    (UNU-MERIT)

Abstract

Many countries in the world have adopted policies to attract foreign direct investment (FDI), placing the traditional focus on the maximisation of FDI flows, what can be labeled as a quantitative approach. Recently it has been argued that the FDI policy should be more selective, promoting good quality FDI inflows. The "quality" implies a certain level of technological intensity of activities and functions encompassed in an investment project, and therefore its potential impacts on host country's development. Notwithstanding the importance of this new qualitative approach, a bias towards FDI flows has persisted. While they have received full attention, foreign-owned affiliates already established in an economy have been somehow neglected. This paper seeks to overcome this imbalance and proposes a new approach to FDI policy that incorporates both dimensions. Our main argument is that policy aiming to fostering the development and innovativeness of TNC affiliates can be more effective than the attraction of new affiliates.

Suggested Citation

  • Filippov, Sergey & Costa, Ionara, 2007. "Redefining Foreign Direct Investment Policy: A Two Dimensional Framework," MERIT Working Papers 2007-029, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2007029
    as

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    File URL: https://unu-merit.nl/publications/wppdf/2007/wp2007-029.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign Direct Investment; Multinational Enterprises; Foreign Affiliates; Public Policy; FDI;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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