Research: Developing smarter policies

Research summary

Researchers examined the links between foreign investment and sustainable economic and social development, particularly the growing challenges for policymakers around the world to simultaneously increase, retain and upgrade foreign direct investment (FDI) and the activities of multinational corporations (MNCs) in their countries and regions.

The team carried out large-scale representative surveys in major host FDI countries, including of the MNC subsidiaries of the top ten FDI investor countries, resulting in a combined evidence base from over 3,000 foreign-owned firms.

Developing a new policy framework

The research team developed a new conceptual policy framework that links more open and modern industrial policies to both societal and company benefits, creating a mutually-beneficial approach to attracting and developing inward FDI.

Informed by internationalisation processes within MNCs, the framework sets out market-enhancing, pro-active industrial policies that align with countries’ investment policies.

Key findings

Through analysis of the survey findings, two themes emerged:

1. New investment and industrial policies can help align host country needs and investor objectives

When MNCs are deeply embedded in their host economies, they can play a major role in anchoring and upgrading FDI towards higher value activities.

This benefits both the host country – in terms of productivity growth, skilled job creation and export growth – and the investor, by contributing to the competitiveness and performance of their MNCs.

But researchers identified a need for policymakers to better understand the complex internationalisation processes in MNCs. Policymakers also need to work more closely with MNC managers to support embedding and adopt effective inward investment policies targeted at FDI upgrading, the research showed.

2. Partnership-type labour relations benefit both investors and host countries

The researchers found that constructively engaging with trade unions and workforce representatives in managing production changes and workplace innovation can help foreign-owned firms create benefits for both investors and domestic host country stakeholders.

Although these partnerships are relatively rare, they can benefit both investors (through higher productivity and profitability) and employees (through effective voices, decent work, better conditions, upskilling and improved well-being).

Research outputs

Academic publications and policy papers

•  McDonald, F, Gammelgaard, J, Tüselmann, H and Dörrenbächer, C (2020) “How TNC subsidiaries shine in world cities: policy implications of autonomy and network connections”  Transnational Corporations, 27(1), 35-61
• Tüselmann, H, Dörrenbächer, C, Cao, Q, and Meissner, R (2020) Mitbestimmungsverhalten und Arbeitsbeziehungen in ausländischen Unternehmen in Deutschland, Hans-Böckler-Stiftung Book Series: Düsseldorf  
• Buzdugan, S (2018) Written evidence submitted by Manchester Metropolitan University to International Development Committee International Development (DFID) Economic Development Strategy Inquiry 
• Buzdugan, S and Tüselmann, H (2018) ‘Making the most of FDI for Development: ‘New’ industrial policy and FDI deepening for industrial upgrading’, Transnational Corporations, 25(1), 1–26
• Tüselmann, H, and Buzdugan, S (2016) Making the most of FDI for industrial upgrading and development: Harnessing IIA policy-space through evidence based lessons for ‘new’ industrial policy, UNCTAD High Level Expert Meeting on Reforming International Investment Agreements, 16 March 2016, UNCTAD, Geneva
• Buzdugan, SR and Payne, AJ (2016) The long battle for Global Governance, Routledge: Abingdon, Oxfordshire
• Tüselmann, H, McDonald, F and Allen, M (2015) ‘Vive les différences? Voice in French MNCs’ overseas workplaces: a comparative study of voice in French, German and US subsidiaries in the UK’, International Journal of Human Resource Management, 26(8), 1151–68
• Gammelgaard, J, McDonald, F, Stephan, A, Tüselmann, H and Dörrenbächer, C (2012) ‘The impact of changes in subsidiary autonomy and network relationships on performance’, International Business Review, 21(6), 1158–72
• Gammelgaard, J, McDonald, F, Tüselmann, H, Dörrenbächer, C and Stephan, A (2009) ‘Subsidiary role and skilled labour effects in small developed countries’, Management International Review, 41(1), 27–42
• Tüselmann, H, McDonald, F, Allen, M, Heise, A and Voronkova, S (2007) Employee Relations in Multinational Companies, Palgrave Macmillan: Basingstoke
• McDonald, F, Tüselmann, H, Dimitratos, P and Voronkova, S (2005) ’The strategic development of foreign owned subsidiaries and employment in host locations’, Environment and Planning C: Government and Policy, 23(6), 867–882