State Institutions and Foreign Direct Investment in Emerging Economies
The impact of host country institutions and policy on innovation by multinational firms in emerging economies.
In the past, multinational firms have looked to developing countries as sources of raw materials, markets, or production efficiencies, but rarely as locations for innovation. Today, however, R&D facilities and other indicators of multinational-linked innovation are becoming more common in emerging economies. In this book, Patrick Egan investigates patterns of inward foreign direct investment (FDI) in developing countries, considering the impact of host country institutions and policy on the innovative activities undertaken by multinational firms. He examines the uneven spread of innovation-intensive foreign direct investment and emerging sectoral distributions, then develops a number of arguments about the determinants of multinational innovation in developing countries. Firms are attracted by a country's supply of skilled labor and are often eager to innovate close to new markets; but, Egan finds, host country institutions and the configuration of the host country's investment policies have a strong impact on firm decisions and evolving country investment profiles.
Egan uses econometric analysis to identify determinants of multinational innovation, and examines differences among state institutions as a key variable. He then offers a detailed case study, assessing Ireland's attempts to use foreign direct investment in innovation as a catalyst for development. While FDI is a potential vehicle for industrial upgrading, Egan cautions, it is neither necessary nor sufficient for development. Furthermore, innovation-intensive investments are not likely to develop linkages with local actors or otherwise embed themselves in host economies in the absence of active, discriminating policies channeled through coherent and coordinated institutions.
Hardcover$35.00 S | £28.00 ISBN: 9780262037358 312 pp. | 6 in x 9 in 23 figures
Egan's discourse fluently integrates ideas from political economy, international business, economics, and development. Here is an articulate treatise on the pitfalls and opportunities for emerging economies that seek to leverage multinational corporations to advance and sustain their economic growth. A must-read for policy makers and academics everywhere.
The John H. Dunning Chair of International Business, University of Reading, UK; author of Globalization and Technology
This book is a major contribution to the literature on the role of foreign direct investment (FDI) in development. Globalizing Innovation goes beyond prevailing views to show that attracting FDI alone is not enough to provide a significant positive impact in developing countries; the governments of these countries themselves need to take steps to ensure that this FDI promotes local innovation. Scholars and policymakers alike will benefit from Patrick Egan's insights into how governments can partner with foreign firms in ways that maximize prospects for local innovation and sustainable economic development.
Roy C. Nelson
Associate Professor of Global Studies, Thunderbird School of Global Management, Arizona State University; author of Harnessing Globalization: The Promotion of Nontraditional Foreign Direct Investment in Latin America and Industrialization and Political Affinity: Industrial Policy in Brazil
Egan provides a fresh insight into how politics affects the strategies of multinational firms to transfer technology and spur innovation in developing countries. The result is an important study that will be of interest to academics and practitioners interested in the impact of globalization on economic development.
Pablo M. Pinto
Associate Professor, University of Houston; author of Partisan Investment in the Global Economy: Why the Left Loves Foreign Direct Investment and FDI Loves the Left