Globalisation , Productivity and Technology Research Paper 2004 / 11 Foreign direct investment and local economic development : Beyond productivity spillovers by Holger Görg and Eric Strobl

We investigate how multinational companies can foster economic development of the host country at the micro level. Traditionally the empirical literature measuring spillovers to the host economy arising from foreign direct investment has focused on productivity spillovers, i.e., technological externalities. In this paper we emphasise that pecuniary externalities from multinationals can also be important. These can affect plant start-up and post-entry performance in terms of survival and growth. We substantiate this by outlining and discussing previous and providing new empirical results using a comprehensive plant level panel data set for the Republic of Ireland. JEL classification: F2