ABSTRACT
Regional institutions have a role to play in guiding and reshaping global value chains (GVCs) using the key vehicles of multinational enterprises (MNEs) and foreign direct investment (FDI). If regional policy decision-makers want to increase the chances of embedding and reshaping GVCs in their regions, then the capacity of both national and regional institutions is critical. One mechanism through which regional policies can shape GVCs is by influencing the behaviour of MNEs and their foreign investment decisions. Investment promotion agencies (IPAs) interact with the variation at the firm level and how this affects FDI, thereby ensuring opportune regional GVC-building. IPAs represent a cost-efficient way of attracting the right kind of FDI. While the IPA may bring in general FDI, local content or local linkage units are different. IPAs are also a potential policy tool for lagging regions, and regional IPAs have indeed become increasingly common in both advanced and emerging economies.
