Linking FDI motivation and host economy productivity effects: conceptual and empirical analysis

Nigel Driffield and James H Love
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James H Love: Economics and Strategy Group, Aston Business School, Aston University, Birmingham, UK

Journal of International Business Studies, 2007, vol. 38, issue 3, 460-473

Abstract: We develop a taxonomy that relates foreign direct investment (FDI) motivation (technology- and cost-based) to its anticipated effects on host countries’ domestic productivity. We then empirically examine the effects of FDI into the United Kingdom on domestic productivity, and find that different types of FDI have markedly different productivity spillover effects, which are consistent with the conceptual analysis. The UK gains substantially only from inward FDI motivated by a strong technology-based ownership advantage. As theory predicts, inward FDI motivated by technology-sourcing considerations leads to no productivity spillovers. Journal of International Business Studies (2007) 38, 460–473. doi:10.1057/palgrave.jibs.8400268

Date: 2007
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