ABSTRACT
Quantitative research on FDI effects in host economies has produced an impressive amount of evidence on the existence and nature of FDI externalities. Having said so, it is also the case that the evidence is characterised by a substantial degree of heterogeneity, indicating the complexity of identifying these productivity effects. Furthermore, it is important to recognise that quantitative studies face limitations when it comes to answering important questions on why and how FDI externalities are transmitted. For instance, both Haskel et al. (2007) and Javorcik et al. (2004) present evidence indicating that the nationality of FDI firms may be important for the materialisation of positive externalities. Although such a finding is clearly important, it does not tell us why this may be the case. Why would say US-owned FDI firms generate less or more externality effects compared to EU FDI? Especially from the point of view of a host economy’s government, it is vital to understand what forces are captured by such a broad characteristic of nationality, if it wants to design policies to influence FDI productivity effects.
