Multinational Enterprises and Economic Development in Host Countries: What We Know and What We Don't Know

Rajneesh Narula and André Pineli ()
Additional contact information
André Pineli: Henley Business School, University of Reading

John H Dunning Centre for International Business Discussion Papers from Henley Business School, University of Reading

Abstract: The attraction of multinational enterprises (MNEs) has become a key component of development policies. Generous incentive packages are offered by governments to attract foreign direct investment (FDI), although few countries perform proper cost/benefit analyses. MNEs can have a decisive influence on the development path of countries, although the effectiveness of an FDI-assisted development strategy depends on a variety of factors. Net benefits depend not only on quantity, but also on the quality of FDI. Quality has to do with the MNE's investment motivations, the affiliates' mandate and autonomy, which in turn determine the potential for linkages and spillovers. These effects also depend on the capacity of domestic firms to absorb, internalise and upgrade their knowledge assets. A sound FDI policy must not be exclusively concerned with attracting capital investment, but must prioritise enhancing the local embeddedness of the MNEs. Globalization and subsequent changes in economic organization require both policy makers and scholars to reconsider their understanding of FDI and development. 'FDI' and 'MNEs' are no longer synonyms, as MNEs are increasingly able to control value chains without ownership through equity. Poor data and weak methodologies mean making realistic estimations of development effects is also increasingly fraught with difficulty. The tools to measure linkages and spillovers are increasingly outdated, as we cannot estimate non-equity engagements or knowledge flows, and this means we are unable to objectively judge if foreign investments have a net positive or negative effect, and whether such effects persist or attenuate over time.

Keywords: multinational enterprises; foreign direct investment; economic development; developing countries; externalities; spillovers; linkages (search for similar items in EconPapers)
JEL-codes: D62 F23 O14 O19 O24 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-cse and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.henley.ac.uk/files/pdf/research/papers- ... arula_and_Pineli.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.henley.ac.uk/files/pdf/research/papers-publications/JHD-2016-01_Narula_and_Pineli.pdf [302 Found]--> https://www.henley.ac.uk/files/pdf/research/papers-publications/JHD-2016-01_Narula_and_Pineli.pdf)

Related works:
Chapter: Multinational Enterprises and Economic Development in Host Countries: What We Know and What We Don’t Know (2017)
Working Paper: Multinational enterprises and economic development in host countries: What we know and what we don't know (2016)
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:rdg:jhdxdp:jhd-dp2016-01

Access Statistics for this paper

More papers in John H Dunning Centre for International Business Discussion Papers from Henley Business School, University of Reading Contact information at EDIRC.
Bibliographic data for series maintained by Marie Pearson ().