Inward FDI and regional performance in Europe after the Great Recession

Riccardo Crescenzi and Roberto Ganau

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

Abstract: This paper looks at inward foreign direct investment (FDI) and regional labour productivity in the aftermath of the Great Recession, exploring two FDI-induced effects. The first effect is linked with a capacity of FDI per se to trigger short-term productivity gains in response to a global shock. The second effect is associated with the degree of industrial diversification of these investment flows. The results suggest that it is not the amount of foreign investment received per se that matters for productivity recovery but its composition. A low degree of FDI diversification helped regions to gain productivity after the shock. The effect is stronger in regions with an industrial profile concentrated in a limited number of sectors, particularly in services. FDI can support regional recovery, but in the short run, it does so by matching and reinforcing existing regional specialisation profiles and to the benefit of services-oriented regions.

Keywords: inward FDI; industrial profile; regional growth; European Union (search for similar items in EconPapers)
JEL-codes: F20 R11 R12 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2025-03-31
New Economics Papers: this item is included in nep-eec, nep-eff, nep-eur, nep-fdg, nep-geo, nep-int and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Cambridge Journal of Regions, Economy and Society, 31, March, 2025, 18(1), pp. 167 - 192. ISSN: 1752-1378

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:125406

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