Assessing Value Creation and Backward Linkages in Foreign Investment: A Combination of Macro and Micro Tools

Teresa Morais Costa, Alexandre Videira and Francisco Veloso

Chapter 13 in Multinationals, Clusters and Innovation, 2006, pp 214-233 from Palgrave Macmillan

Abstract: Abstract Foreign Direct Investment (FDI) is considered an important pillar of economic development (Katz, 1969; Aitken and Harrison, 1991; Markusen and Venables, 1997; Sjöholm, 1999a,b). There are multiple avenues through which FDI can contribute to an economy (de Mello, 1997; Moran, 1998). The foreign investor can provide a product that the local companies are not capable of supplying, or it can stimulate the national economy by creating an additional demand for intermediate or primary goods, as well as for labor. It can also complement national savings, thus contributing to the accumulation of capital. In addition, FDI has the potential to supply knowledge and technology capable of generating externalities that lead to higher productivity and increase national output (Haddad and Harrison, 1993; Aitken et al., 1996), for example, by bringing technologies that increase the marginal productivity of existing ones (Romer, 1986), or training and developing new capabilities in the workers (Borensztein et al., 1995).

Keywords: Foreign Direct Investment; Assembly Line; Final Demand; Monetary Unit; Auto Industry (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-62494-8_13

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DOI: 10.1057/9780230624948_13

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