We summarise the key empirical evidence on the nexus between MNEs and
development, focusing on issues that are relevant for the formulation,
implementation and assessment of policies by host developing countries.
We also delve into what we do not know, as well as topics for which the
evidence is still quite blurred. We discuss the reasons for the absence
of clear evidence, and potential avenues for future research to improve
policies. Although most countries rely on MNEs/FDI as a central plank of
their development strategy, the collective weight of academic research
has not led to a fine-tuning of policy implementation. Countries still
rely on policies for which evidence is sparse, or no longer valid in an
era of globalisation. Much of the literature has focused on
externalities and spillovers, and has deemphasised the other ‘effects’
of MNE activity, implicitly assuming that MNEs are almost always
beneficial for development. Few rents are costless when the opportunity
costs of scarce resources are considered, especially in the longer term.
Despite the abundance of empirical studies (of increasing
sophistication), most ignore the significance of structural change.
Growth and the interaction with MNE activity is not linear or monotonic
over time, because the economy itself is in a constant state of flux.
Keywords: multinational enterprises; economic development; developing countries; GDP growth; spillovers; public policy
JEL: D62; F23; O14; O19; O24