Multinational Firms and the Globalization of Developing Countries

IDE Research Bulletin

March 2014

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The past few decades have seen that a number of developing countries attempt to increase foreign direct investment (FDI) by removing foreign ownership restrictions and offering preferential investment incentives for foreign firms. With FDI promotion, governments in developing countries attempt to build an industrial cluster and participate in global value chains. In this process, the expectation is that local firms can absorb advanced technology brought in by multinational firms through various channels such as imitation of advanced production technology, mobility of skilled workers, and buyer-supplier linkages on intermediate goods. Motivated by these policy issues, this research project seeks to shed light on the globalization issue in developing countries by investigating the role of multinational firms.