A Local Impact Assessment of Globalization

Foreign Direct Investment and Development

This Presentation outlines effects of foreign direct investments (FDI) of large transnational corporations (TNCs) on economic and social development through the backward linkages they create.

Focusing on the role of backward linkages between TNCs and small and medium sized enterprises (SMEs), this presentation provides an analysis of the development impact of FDI embedded in a development construct based on the capabilities approach.

Backward Linkages between TNCs and domestic SMEs are those relationships where large international business organizations are buying intermediate goods and services from domestic SMEs. Such backward linkages were traditionally viewed as a potent development lever but more recent empirical evidence is rather sobering. The question thus is what can be done to ensure that the potential of backward linkages between TNCs and domestic SMEs in developing countries to be development conducive comes to fruition. This presentation lays a theoretical basis for analysis and then explores two examples of development-conducive backward linkages from Brazil.

Foreign Direct Investment and Development

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