Foreign and Domestic Investment: Complements or Substitutes?

Nigel Driffield, DR Hughes

    Research output: Contribution to journalArticle

    29 Citations (Scopus)


    This paper tests, at the regional and industry level, the extent to which domestic investment is stimulated or crowded out by inward foreign direct investment. The paper develops a model of domestic investment, based on standard models drawn from macroeconomics and industrial economics. The paper then goes on to show that, at a general level, the 'development' or agglomeration hypothesis is confirmed that domestic investment is indeed stimulated by inward investment. However, there is also evidence that, in certain regions, inward investment has crowded out domestic investment. The implications of this from the perspective of regional policy are briefly discussed.
    Original languageEnglish
    Pages (from-to)277-288
    Number of pages12
    JournalRegional Studies
    Issue number3
    Publication statusPublished - 1 May 2003


    • domestic investment
    • inward investment
    • crowding out


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