Revisiting the branch plant syndrome: Review of literature on foreign direct investment and regional development in Western advanced economies

Abstract

This paper tests whether earlier concerns over the negative effects of branch plant syndrome (i.e. lack of stable jobs, lack of research and development (R&D) activities, limited backward linkages, appropriation of government incentives and lack of spillover effects) are still valid in the context of Western advanced economies. It performs this examination by compiling numerous empirical studies on related issues. While every issue is highly debated, the minimum consensus is that we should acknowledge the diversity of branch plants. The implication of this finding to public policy is that instead of blind welcome or wholesale rejection, each investor should be analysed carefully before the government offers a generous incentive package.