The Impact of Foreign Investment on Host Countries: A Review of the Empirical Evidence

This paper reviews the empirical evidence on host country effects of foreign direct investment. The focus of the paper lies on the transfer and diffusion of technology from foreign multinationals to their host countries, the impact of foreign MNCs for the trade performance of host countries, and the effects on competition and industry structure in host countries. We conclude that MNCs may play an important role for productivity and export growth in their host countries, but that the exact nature of the impact of FDI varies between industries and countries, depending on country characteristics and the policy environment. Magnus Blomström Ari Kokko Stockholm School of Economics Stockholm School of Economics PO Box 6501 PO Box 6501 113 83 Stockholm, Sweden 113 83 Stockholm, Sweden E-mail: [email protected] E-mail: [email protected] and NBER and CEPR The Impact of Foreign Investment on Host Countries: A Review of the Empirical Evidence Magnus Blomström Stockholm School of Economics, NBER and CEPR Ari Kokko Stockholm School of Economics