Foreign and domestic investment: regional development or crowding out?

Nigel Driffield, Dylan Hughes

Research output: Contribution to journalArticlepeer-review


This paper tests, at the regional and industry level, the extent to which domestic investment is stimulated or crowded out by inward foreign direct investment. The paper develops a model of domestic investment, based on standard models drawn from macroeconomics and industrial economics. The paper then goes on to show that, at a general level, the 'development' or agglomeration hypothesis is confirmed that domestic investment is indeed stimulated by inward investment. However, there is also evidence that, in certain regions, inward investment has crowded out domestic investment. The implications of this from the perspective of regional policy are briefly discussed.
Original languageEnglish
Pages (from-to)277-288
Number of pages12
JournalRegional studies
Issue number3
Publication statusPublished - May 2003

Bibliographical note

This is an Author's Accepted Manuscript of an article published in Driffield, N., & Hughes, D. (2003). Foreign and domestic investment: regional development or crowding out?. Regional studies, 37(3), 277-288. Regional studies 2003 © Regional Studies Association, Taylor & Francis, available online at:


  • inward investment
  • domestic investment
  • crowding out


Dive into the research topics of 'Foreign and domestic investment: regional development or crowding out?'. Together they form a unique fingerprint.

Cite this