Indirect FDI: Some lessons learned

Author: Kálmán Kalotay

In: ELKH KRTK, Institute of World Economics, Working Paper Nr. 272 (2023) June 2023

Abstract

This review presents some lessons learned about indirect foreign direct investment (FDI), mostly over the past decade. Indirect FDI denotes investment projects, in which the ultimate owner is different from the immediate investor. The review categorizes the literature of the 2010s and early 2020s into three main threads: one focusing on the developmental aspects of the phenomenon, another one with a fiscal–legal–regulatory approach, and a third one raising questions about the quality and reliability of FDI data or special aspects such as the relationship between sanctions and outward FDI. This review also highlights improvements in FDI data collection on ultimate investors over the past decade, based on the example of three Visegrad countries. In this respect, important progress has been achieved. Prospects for future research on indirect FDI are quite promising, especially via interdisciplinary approaches and aiming at improving the coverage and the quality of relevant data. Ultimately, the quality of the evaluation of indirect FDI hinges, more than anything, on the availability of empirical evidence.