Multinational Heterogenity and Knowledge Diffusion

Abstract

During the past two decades, governments all around the world have spent millions of dollars to attract Foreign Direct Investment (FDI) of multinational companies. The large sums of money spent in this way have been justified on grounds of the alleged benefits of such activities in terms of domestic employment and productivity. Despite a large amount of academic research regarding the productivity effects of FDI, unequivocal evidence of their existence is still lacking. This thesis contributes to this research by explicitly investigating the effect of different forms of multinational heterogeneity on host-country productivity. The findings point out important roles for heterogeneity in ownership structures, market orientation, and investment motives of the foreign subsidiaries of multinationals. Taking these forms of heterogeneity into account in future theoretical and empirical research in this area will contribute to our understanding of the conditions under which productivity effects of FDI arise.