FOREIGN DIRECT-INVESTMENT, TECHNOLOGICAL-CHANGE, AND ECONOMIC-GROWTH WITHIN EUROPE

The extent of multinational activity and the share of world trade acco unted for by multinational enterprises has risen steadily over the pas t two decades. This has led to renewed interest within Europe in the i mpact of multinational enterprises on employment, investment and trade , and the structure of economic growth. In this paper we discuss the f actors behind the continued growth of foreign direct investment and it s wider consequences on home and host economies. We report evidence on tile impact of production relocation on the export performance of a n umber of OECD economies, and investigate the extent ro which technolog y transfer from foreign-owned firms has affected the rate of technical progress within the German and UK economies. The acquistion of firm-s pecific knowledge-based assets is found to be an important Factor behi nd the growth of FDI, suggesting that such investments are likely to b e an important channel for the diffusion of ideas and technologies.