Foreign direct investment and employment in host regions

McDonald, Frank, Tuselmann, Heinz and Heise, Arne (2002) Foreign direct investment and employment in host regions. European business review, 14 (1). pp. 40-50. ISSN 0955-534X

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Abstract

Investigates the role of direct foreign investment (DFI) in promoting employment in host regions in the European Union (EU). A theoretical framework is developed which suggests that the initial impact of DFI on employment is likely to be small and mainly linked to the creation of low skilled jobs with the loss of employment in host economies due to the displacement of domestic output by increased exports from the parent companies of subsidiaries. However, in the longer term, DFI flows should diversify the operations of subsidiaries thereby inducing a change in the pattern of jobs in host regions. The framework is assessed using evidence from a survey of German subsidiaries in north-west England. Concludes with some policy implications and a future research agenda to expand and develop knowledge in this area.