7. Concluding comments: home country effects in developing countries
So far, this paper has discussed the home country effects of FDI and the home country policies meant to handle these effect from a developed country perspective. To what extent can the results be generalized to developing countries? A first observation is that it may be convenient to distinguish between two types of outward investment from developing countries. Firstly, MNCs from developing economies invest in other developing economies. Whether these foreign investments are horizontal or vertical, they are not likely to differ in kind from FDI flows between industrialized countries. One possible exception concerns the pattern of firm-specific intangible assets that allow firms to become multinational. For developing country firms, it is not very likely that the competitive assets are made up of advanced production technologies (since few developing economies have substantial resources for R&D). Instead, it is probable that developing country affiliates exploit advantages related to organizational skills, marketing knowledge, and other assets that do not require advanced technological capabilities. In general, it can be assumed that these skills or assets are not too distant from the existing advantages of local host country firms. The low technology gap and the difficulties to protect some of these assets with patent rights (e.g. organizational skills and marketing knowledge) are also likely to mean that there is a larger risk for spillovers to local host country firms. If the investing MNCs expect that their competitive advantages are temporary, it should mean that they are more cautious about irreversible production decisions: hence, the structural home country effects of FDI should be small.