A home-country effect is an economic or social impact that an outward foreign direct investment (OFDI) has in the home country of the investment. The home country is the country from where the investment originates and where the investing multinational enterprise (MNE) is headquartered.
This Toolkit distinguishes between ten types of home country effects, all of which in combination contribute to an eleventh effect: economic growth and development. Home-country effects are important because they can potentially generate not only financial returns, but also benefits in areas that are of critical importance for economic and sustainable development, such as technological advancement, innovation, industrial upgrading, productivity, resources, employment etc.
OFDI from both advanced and developing countries can generate home-country effects. In developing economies, these effects can contribute to process of economic and sustainable development. Thus, OFDI and its home-country effects can play a role in achieving the SDGs and the United Nations 2030 Agenda for Sustainable Development (UNESCAP 2020).
Interactions
General interactions that affect all home-country effects to some extent:
B4) Investment size: Larger investments could, in theory, generate more meaningful home-country effects as their size implies greater impact. However, larger investments potentially carry greater risks for the home country.
B9) Time since investment: In general, home-country effects tend to be realised after a longer period of time.
B10) Home country characteristics: Various characteristics of the home country matter for the presence of home-country effects and the extent to which they can be generated.
General resources:
OECD Benchmark definition of foreign direct investment.
UNESCAP (2020) for an overview of home-country effects and their importance for achieving the United Nations 2030 Agenda for Sustainable Development and its associated Sustainable Development Goals (SDGs).
Knoerich (2017) for an overview of home-country effects.
Knoerich (2018) for a short summary.
Moran (2006, chapter 4, pages 97-112) for an overview of home-country effects.