Outward Direct Investment

This article, taking OECD work from the early 1990s as a starting point, updates new evidence on the effects of outward direct investment on the home economy. Focusing on three possible impacts, namely employment, foreign trade and technology transfers, it finds that outward investment almost invariably has a beneficial macroeconomic effect. Outward investment generally boosts exports as companies trade with their foreign affiliates, and in some cases investment abroad in the context of strategies equally aimed at boosting trade. Employment in the home economy also tends to benefit from outward investment, although this may not always be the case within the investing sector itself. A bit more uncertainty still relates to the technology effects. Some companies invest to acquire know-how abroad, while others do so to undertake knowledge-based activities such as research and development away from their home country. The latter generally benefits the investing enterprise, but the broader societal benefits are elusive.

International Investment Perspectives 2006

Outward Direct Investment

What Benefits to the Home Countries?