Redefining Foreign Direct Investment Policy: A Two Dimensional Framework
Sergey Filippov & Ionara Costa
#2007-029
Many countries in the world have adopted policies to attract foreign
direct investment (FDI), placing the traditional focus on the
maximisation of FDI flows, what can be labelled as a quantitative
approach. Recently it has been argued that the FDI policy should be more
selective, promoting good quality FDI inflows. The "quality" implies a
certain level of technological intensity of activities and functions
encompassed in an investment project, and therefore its potential
impacts on host country's development. Nothwistanding the importance of
this new qualitative approach, a bias towards FDI flows has persisted.
While they have received full attention, foreign-owned affiliates
already established in an economy have been somehow neglected. This
paper seeks to overcome this imbalance and proposes a new approach to
FDI policy that incorporates both dimensions. Our main argument is that
policy aiming to fostering the development and innovativeness of TNC
affiliates can be more effective than the attraction of new affiliates.
JEL classification: F21, F23, O24, O38
Key words: foreign direct investment, multinational companies, foreign
affiliates, public policy
UNU-MERIT Working Papers
ISSN 1871-9872