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|title: ||Home country measures for FDI: an analysis at regional level|
|authors: ||Banno, M.|
Varum, C. A.
|issue date: ||2010|
|abstract: ||The promotion of outward investment through a number of home country measures has become
prominent in recent years (hereafter HCMs) (UNCTAD, 2001). Scope and justification
for public intervention are motivated by two reasons. First, HCMs can correct for market and
coordination failures and, second, they are good for home country development (UNCTAD,
2001). In particular, governments may provide policy measures in the attempt to encourage
investment activity and hence induce business growth and competitiveness and reduce regional
disparities (Atzeni and Carboni, 2008; Craig et al., 2008; Skuras and Tzelepis, 2004;
Haapanen et al., 2005). Nevertheless, public intervention can limit competition and give rise
to market inefficiencies (Wollman, 2007). Moreover, when public incentives substitute for resources
that can be traded on markets and support projects that would take place in any case,
they generate a net transfer of resources from taxpayers to granted firms (the so-called deadweight
effect; see Marglin, 1963). Although many empirical analyses on the impact of policy
measures on the level of investments have been carried out, there is no agreement on their effectiveness.
Indeed, the policy and regulatory stance of the capital-exporting country has been
largely neglected and HCMs towards O-FDI are scarcely discussed in the literature.
The relative scarcity of empirical studies of the impacts of these FDI-specific policies is surprising
in light of the strong policy interest in the issue and the active role towards FDI that
government policy in most countries has taken.
Within this context, this study investigates the effectiveness of Italian HCMs by developing
an empirical model that uses information on the population of Italian firms that received incentives
from 2000-2006. Data, aggregated at the regional level, refer to the major public
tools addressed to promoting Italian companies’ FDIs outside the European Union. The objective
is to identify the effectiveness of investment support by measuring the impact of different
HCMs on regional levels of internationalisation.
The analysis suggests that not all the provided measures generate intended effects. In particular
financial incentives (i.e. equity and venture capital funds) and regional service encourage
investment activity and hence can induce business growth and competitiveness and reduce regional
disparities. On the contrary, feasibility studies and other public services seem to be ineffective,
as they do not generate an increase in the level of internationalisation.|
|source: ||36th Annual Conference of the Academy of International Business|
|appears in collections||DEGEI - Comunicações|
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