MNCs, FDI and Host Country Productivity: A Theoreticaland Empirical Appraisal

This paper reviews arguments and empirical findings on two related aspects of FDI (Foreign Direct Investment)—its positive effects on host country firms, and the correlation between FDI and economic growth. With the exception of the unambiguous result of microeconometric studies, which is the superior productivity of foreign firms, the main conclusion extracted from empirical studies is the diversity of results. This diversity suggests that FDI will have different effects, depending on the ‘technological congruence’ and ‘social capability’ of the host economy, as well as the familiarity of indigenous firms to the products and technology of a given Multinational Corporation (MNCs).