Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/324230 
Year of Publication: 
2025
Series/Report no.: 
Policy Notes and Reports No. 97
Publisher: 
The Vienna Institute for International Economic Studies (wiiw), Vienna
Abstract: 
Foreign direct investment (FDI) has become a driver of growth in both developed and developing countries, as it enables the transfer of know-how and advanced technologies to host economies. This policy note discusses how FDI can effectively support innovation and green growth within the European Union (EU). It focuses on the role of regulatory harmonisation and technological alignment as factors that can significantly influence the location decisions and effectiveness of FDI. Similarly, as spill-overs from foreign affiliates substantially enhance local innovation capabilities, particularly in green technologies, we argue in favour of policies enhancing domestic absorptive capacity and of policy mechanisms that can systematically integrate sustainability criteria into FDI screening processes. Aligning investment policies with regional technological strengths and green transition goals will enable the EU to leverage FDI strategically for sustainable economic growth and climate resilience.
Subjects: 
FDI
regulatory distance in NTMs
technological proximity
environmental technology
regional spill-overs
JEL: 
F23
L23
O24
O33
O34
R58
Q55
Document Type: 
Research Report

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