Cluster or Capture? Manufacturing Foreign Direct Investment, External Economies and Agglomeration

Abstract

This review of the external economies associated with manufacturing FDI in host economies argues that the balance of forces of internalisation and externalisation is currently skewed towards the former and the interests of MNEs rather than the latter and the interests of local and national communities. A stylised comparison of developmental and competition state interventions suggests that in the absence of effective and co-ordinated interventions by governments, there will commonly be a failure of the logic of internalisation to permit localised externalisation.