Macro-level studies typically offer a
better understanding of the role of local conditions in eliciting
positive benefits from FDI to materialize, but they
continue to be limited by identification issues or the very
plausible possibility that growth might itself spawn
more FDI. This potentially endogenous relationship
implies that any estimates are likely to overstate the positive
impact of foreign investment on growth. Microlevel
studies can avoid such identification issues, but
available firm-level datasets tend to cover specific and quite different types of countries and are very rarely
available in developing countries, thus making it difficult
to understand the role of country-specific conditions
across different time periods. Furthermore, measurement
issues plague measures of inputs and outputs,
which can bias results.