B4. Investment Size

Home-country effects might be affected by the size of the investment as measured, for instance, by the amount of capital invested or the number of subsidiary employees. A useful distinction can be made between large, medium-sized and small investments.

Large-scale investment projects requiring considerable amount of capital include those in construction, infrastructure and natural resources exploitation. Manufacturing projects can, but do not have to be, of a large size. R&D centres and sales offices vary in size and can potentially be quite small.

For larger projects, the risk is potentially higher that investments lead to large-scale financial losses and capital flight, result in significant offshoring or undermine competitive neutrality (see Section E: Potential risk factors).

Key insights

• Empirical evidence on the impact of investment size on the generation of home-country effects still needs to be developed. Most studies use data and methodologies that do not capture size effects, such as country-, province-, district- or industry-level data or data at the firm-level accounting for whether an investment was made, rather than accounting for the size of the investment.
• 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.
• OFDI policy and HCMs could promote OFDI regardless of investment size. Larger investments might require more regulating and monitoring compared to smaller investments.