SOTA Review

FDI and local productivity .

ERC SOTA Review No 31

Associated Themes
  • Productivity and performance

The debate concerning the impact that attracting inward investment can have on local productivity has raged for some 30 years. The essential reason for this is that is that there was a juxtaposition between “cost per job” estimates regarding the benefits of seeking to attract inward investment through subsidy, and the firm-based academic literature that analysed firm internationalisation in terms of the new technology or knowledge that often accompanies foreign direct investment. Cynically, one may argue that the emphasis that was placed on determining the productivity growth effects of inward investment was an attempt to justify such subsidies, even when cost per job calculations were unfavourable, but both the policy-based and academic literature represents increasingly detailed attempts to determine the nature of the wider economic benefits of attracting inward investment