Foreign-owned subsidiaries: a neglected nexus between foreign direct investment, industrial and innovation policies

Abstract

This paper addresses the interplay between foreign direct investment (FDI) and the industrial and innovation policies of host economies. Drawing on insights from both business and policy literature, the paper argues that the prevailing macroeconomic perspective related to the attraction of FDI inflows and disregard for existing foreign subsidiaries are misleading. The rationale for this claim is the very fact that foreign subsidiaries are part of the innovation and the industrial systems of their host countries. Hence, their economic and innovative performances impact the overall dynamics and competitiveness of their host countries.