The question that has been discussed most frequently in the home country debate is whether production abroad complements or substitutes for exports by the parent company or by other firms in the home country. In this debate, exports have often been used as a synonym for domestic production, investment, or employment, although it should be noted already at this point that the employment effects are likely to differ from the export and output effect. The reason is that the exports and output may well increase without any simultaneous increase in employment if there are structural effects, e.g. related to productivity or capital intensity. The debate has re-emerged from time to time, without definite conclusions, because of two complications. A first problem is that the net impact of FDI on home country exports (or production and investment) cannot be determined theoretically, since it combines several separate effects that are sometimes of opposite signs. On the one hand, it is clear that most forms of FDI, both horizontal and vertical, replace some previous home country production and exports. On the other hand, FDI also tends to promote exports of intermediate goods from the parent company or various home country suppliers to the new foreign affiliates: not even purely horizontal affiliates are likely to manage all their operations independently. The net impact of these two effects is likely to vary from case to case, depending particularly on how total sales are affected by the foreign direct investment decision. Looking specifically at horizontal FDI, what matters is the increase in foreign sales resulting from the establishment of a foreign affiliate. The larger the increase in foreign sales, the more likely it is that the export loss in terms of finished goods can be compensated for by an increase in the export of intermediate goods to the affiliate. Although the export substitution debate has rarely focused on vertical FDI, similar arguments can be made about the employment or investment effects of such projects. A vertical FDI venture typically replaces some production that was initially located in the home country, but the net effect on domestic employment depends on how the investment affects the MNCs total sales. By exploiting lower factor costs abroad, the vertical investment makes the MNC more competitive at home as well as abroad. If this increase in competitiveness reduces imports or raises exports, it may create sufficient new employment to compensate for the initial replacement effect. In addition, it is possible that the presence of MNC affiliates abroad facilitates the diffusion of information about other producers from the home country, with positive export and employment effects as a result. Hence, the net impact of outward FDI on domestic production and exports is largely an empirical question.