A new nexus between foreign direct investment, industrial and innovation policies

Ionara Costa & Sergey Filippov


This paper deals with the interplay between foreign direct investment (FDI) and the industrial and innovation policies of host developing economies. It aims to redefine the nexus between these different, though yet strongly interconnected policy areas, by bringing the affiliates of multinational corporations already established in a host economy to the first level of analysis. It argues that host country governments should concentrate on enhancing innovativeness and development of existing foreign-owned affiliates, instead of striving to attract higher volumes of FDI inflows.

Key Words: Foreign Direct Investment; Foreign-owned affiliates; Industrial Policy; Innovation Policy

JEL Codes: F21, F23, F29, L25, 025, 038, 039

UNU-MERIT Working Papers ISSN 1871-9872

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