FDI inflows in Europe: does investment promotion work?

Riccardo Crescenzi, Marco Di Cataldo and Mara Giua

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Can active investment promotion efforts attract FDI towards areas and sectors that would not otherwise be targeted? This paper leverages an ad hoc survey on national and sub-national Investment Promotion Agencies (IPAs) in Europe and applies state-of-the-art policy evaluation methods to estimate the impact of IPAs on FDI attraction. The results show that FDI responds to IPAs even in advanced economies. Sub-national IPAs, operating in closer proximity to investors’ operations, attract FDI in particular towards less developed areas where market and institutional failures are stronger. IPAs influence FDI over and above other policies targeting the general economic improvement of the host economies. Impacts are concentrated in knowledge-intensive sectors where collaborative systemic conditions are more relevant. IPAs work best for less experienced companies - ‘occasional’ investors - more likely to suffer from institutional failures. Finally, IPAs are equally effective in attracting companies from both outside and inside the EU Single Market even if the latter are less likely to suffer from regulatory or information asymmetries. Overall, this evidence sheds new light on the role of sub-national IPAs as local ‘institutional plumbers’ in support of foreign investors and their operations.

Keywords: foreign direct investment; investment promotion; multinationals; institutions; European Union; Internal OA fund (search for similar items in EconPapers)
JEL-codes: F21 F23 O24 R58 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2021-09-01
New Economics Papers: this item is included in nep-cwa, nep-fdg and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Published in Journal of International Economics, 1, September, 2021, 132. ISSN: 0022-1996

Downloads: (external link)
http://eprints.lse.ac.uk/110728/ Open access version. (application/pdf)

Related works:
Journal Article: FDI inflows in Europe: Does investment promotion work? (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:110728

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().