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.
Bibliographical noteThis is a post-peer-review, pre-copyedit version of an article published in Journal of International Business Studies. The definitive publisher-authenticated version Driffield, Nigel L. and Love, James H. (2007) Linking FDI motivation and host economy productivity effects: conceptual and empirical analysis. Journal of International Business Studies, 38 (2). pp. 460-473. ISSN 0047-2506 is available online at: http://www.palgrave-journals.com/jibs/journal/v38/n3/abs/8400268a.html
- FDI motivation
- productivity spillovers