Global Development

Foreign Direct Investment

REUTERS/Sean Gardner - Containers await departure as crews load and unload consumer products at the Port of New Orleans along the Mississippi River in New Orleans, Louisiana June 23, 2010.

Blog Post

Does the ‘foreign’ in ‘foreign direct investment’ matter?

January 14, 2016, Ryan Donahue and Brad McDearman

It is seemingly easy to make the case for why metro areas should dedicate resources to attracting foreign direct investment (FDI). Foreign-owned firms pay 20 percent higher wages, on average, than their domestic peers. They also invest more in R&D, representing just 5 percent of employment but 19 percent of corporate R&D spending. But these and other oft-cited benefits of FDI typically have more to do with the strength of multinational corporate firms and the concentration of FDI in high-wage, high-skill advanced industries than with the foreignness of the firm.

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