Context, Motivation and Importance

The Toolkit addresses a major knowledge and information gap on OFDI, home-country effects and home-country measures.

It was created to address a growing demand for more knowledge and better information on the home-country effects of OFDI, the home-country measures introduced by governments to regulate, manage, facilitate and promote outward investment, and the corresponding implications for sustainable development. Such need has grown noticeably in recent years, for the following reasons: 

1.  OFDI and its home-country effects play an important role in the global economy

Cross-border direct investment and the international operations of multinational enterprises are playing an increasingly important role in the global economy. As shown in Figure 1, global OFDI flows have averaged between US$ 1 and 1.5 trillion annually over the past decade, and OFDI stock (i.e., the historically accumulated value of all OFDI) has reached US$ 35 trillion. While OFDI flows are disrupted due to the Covid-19 pandemic, this is unlikely to undermine the overall importance of cross-border investments. Despite the disruptions, OFDI will continue to be important, stabilise after the pandemic, and even play a significant role in global efforts of economic recovery (UNCTAD 2020).

Figure 1 OFDI plays an important role in the global economy
World OFDI, 1980-2020, US$ trillion

Figure 1 OFDI plays an important role in the global economy

Source: UNCTADStat

All such cross-border investments have impact not only in the countries where the investing multinationals operate, but also in the home country at the source of the investment where the multinational is headquartered. This includes the impact of OFDI made years ago that is still operational today, forming part of the accumulated OFDI stock in Figure 1. This Toolkit provides a detailed examination of home-country effects from OFDI and offers insights on ways in which countries can nurture and maximise these.

2.  OFDI from developing and emerging economies has grown considerably, generating home-country development  effects

The growth of OFDI from emerging and developing countries has been especially rapid over the past two decades. While the share of global OFDI flows undertaken by developing and transition economies was a mere eight percent in 2000, the share of developing economies’ OFDI has grown in recent years, reaching 53% in 2020 (see Figure 2). This reflects, in particular, the recent growth of middle- and upper-middle income emerging economies, such as China, where capital has become more available and multinational enterprises have accumulated greater capabilities for OFDI.


Figure 2 Developing economies are increasingly important sources of OFDI
Share of OFDI flows, by type of economy (1970-2020)

Figure 2 Developing economies are increasingly important sources of OFDI

Source: UNCTADStat


During this period, OFDI stock from developing and transition economies increased from US$ 709 billion in 2000 to US$ 9.1 trillion in 2020. Annual flows increased from US$ 92 billion in 2000 to US$ 392 billion in 2020 (Figure 3). Developing economies in the Asia-Pacific region played an important role in this trend – in 2004, the OFDI stock from this region was just US$ 360 billion (excluding Hong Kong), but by 2020 this figure had reached almost US$ 5.5 trillion (UNCTAD 2021).


Figure 3 OFDI from developing countries has increased rapidly in recent years
OFDI stock and flows from developing and transition economies, 1980-2020, US$ trillion

Figure 3 OFDI from developing countries has increased rapidly in recent years

Source: UNCTADStat

For developing and emerging economies, the home-country effects generated from OFDI can be especially important, as they can contribute to the economic development of these countries and assist in the realisation of the Sustainable Development Goals (Perea and Stephenson 2018, UNESCAP 2020). This Toolkit provides insights and information on the ways in which developing countries can nurture and maximise these sustainable development gains from OFDI for their home economies.

3.  There is a considerable knowledge deficit on home-country effects from OFDI

Despite the growing importance of OFDI and its home-country effects, and the potential of such effects to contribute to sustainable development in home countries, the precise ways in which OFDI has an impact on home countries and home country development remains little understood (much less understood than the impact of investments in host countries). The home-country (development) effects of OFDI have been insufficiently examined in the policy and academic literature, resulting in an overall knowledge deficit in this area (Knoerich 2017).

The main ambition for this Toolkit is to correct this knowledge deficit on home-country effects. The Toolkit systematically surveys available evidence on these effects, categorises different types of home-country effects and examines the factors that can influence the prevalence of such effects. Through this process, the Toolkit identifies how these effects can best support home countries in achieving their sustainable development priorities.

4.  There is a considerable information gap on home-country measures

In parallel with the knowledge deficit on home-country effects, there is a similar information gap on HCMs available to governments for regulating, managing, facilitating and promoting outward investment. This situation prevails even though most advanced economy governments have deployed HCMs for many years and there is an uptake in use among developing country governments (Sauvant et al. 2014). Despite this, there is insufficient academic and policy analysis on the types of HCMs available to governments; the degree to which governments adopt HCMs; the ways HCMs are targeted at particular companies or investment activities; and the effectiveness of HCMs in nurturing and maximising home-country effects. In particular, how developing countries can use HCMs to promote home-country effects that contribute to sustainable development remains little understood.

This Toolkit has been created to rectify this knowledge deficit on home-country effects. It collects and consolidates existing government practices on the use of HCMs, categorises the different types of HCMs available to governments, and examines how HCMs can be targeted at specific companies and investment activities. 

5.  How HCMs can actively promote home-country effects remains little understood

Although many governments use HCMs to regulate, manage, facilitate and promote OFDI, it remains unclear how HCMs can be specifically deployed to nurture and maximise home-country effects that would be of particular benefit to the home country and contribute to sustainable development.

The Toolkit establishes this link between HCMs and home-country effects. It provides an analytical tool that explains how HCMs can be used to nurture and maximise the home-country (sustainable development) effects from OFDI, by targeting those companies and investment activities that promise to generate home-country effects. It focuses specifically on how governments in developing countries can nurture home-country effects from OFDI to better enable them to achieve their Sustainable Development Goal (SDG) priorities.

The Toolkit has 7 sections.

Each section addresses specific knowledge deficits and information gaps on OFDI, home-country effects and HCMs:

A. Home-country effects: The first section introduces the different categories of home-country effects and systematically surveys available empirical evidence on the strength of these effects in different countries.
B. Influencing factors: The second section examines and categorises the factors that influence the extent to which OFDI generates home-country effects, and systematically surveys available empirical evidence on such influencing factors in different countries.
C. Home-country measures: The third section introduces the different categories of HCMs and surveys existing practices by various governments in their deployment.
D. Targeting: The fourth section examines how governments can target HCMs at particular types of companies or investment characteristics, and surveys existing targeting practices of various governments.
E.  Potential risk factors: The fifth section introduces the few risks OFDI presents for the home country, and surveys available empirical evidence on such risks.
F.  Analytical tool: The sixth section then analyses how HCMs can be concretely used to nurture and maximise home country (sustainable development) effects. It does this by highlighting how HCMs can be targeted at those companies and investment characteristics that are proven to influence the extent to which OFDI generates home-country effects.
G. OFDI Principles: The seventh section presents some general principles that can be derived from the Toolkit’s insights and analysis.

The Toolkit is a repository of knowledge, information and evidence-based policy advice for a variety of stakeholders and policymakers.

  • The Toolkit informs and updates government officials, international organisations, researchers, experts and academics about the existence and importance of home-country effects, and the strength and magnitude of their influencing factors, based on current empirical evidence. This supports policymakers in deciding upon focus areas for OFDI policy and provides researchers with the tools to advance further research in this area.
  • It informs and updates government officials, policymakers, international organisations, experts and firms about the options governments have to deploy HCMs, what practices are common, and how governments target these measures at specific companies and investment characteristics. This supports policymakers in developing appropriate OFDI policies and HCMs, especially with the aim of advancing home-country sustainable development. International organisations can use the Toolkit to support their technical assistance and capacity-building activities concerning OFDI policymaking, and companies can derive information from it about the HCMs available to them in particular countries.
  • The Toolkit advises government officials, policymakers, experts and international organisations on how HCMs can be concretely used to nurture and maximise home-country (sustainable development) effects from OFDI and offers corresponding recommendations and principles. This can help policymakers better identify the most appropriate policies and HCMs for supporting the generation of home-country effects.

The Toolkit is innovative and a major advancement in OFDI policy.

  • The Toolkit offers the first comprehensive categorisation of the different types of home-country effects and their influencing factors, and the different types of HCMs and associated targeting of companies and investment characteristics.
  • It is the only available resource that provides a full and regularly updated overview of the available empirical evidence on home-country effects and their influencing factors.
  • It provides a detailed overview of HCMs deployed by different countries and of existing practices for targeting them at companies and investment characteristics.
  • It offers an innovative approach to determine how HCMs can best be deployed to nurture and maximise home-country effects.
  • It links the home-country effects with associated sustainable development outcomes, to specifically benefit developing countries.
  • It offers a new set of policy recommendations and principles for OFDI and the generation of home-country effects.

The Toolkit is a regularly updated repository of information and advice.

The information provided in the Toolkit is updated regularly with the latest empirical research on home-country effects and their influencing factors. Information and resources on government practices in the adoption and targeting of HCMs are also continuously updated, and policy measures are added as they become available. Over time, the insights, findings and recommendations derived from the Toolkit’s analyses will evolve in accordance with such updates.

The main version of the Toolkit is provided on this online platform. Users are encouraged to draw primarily on this version for information and advice, as it is reviewed and updated regularly and presented in the most convenient and user-friendly way. The online version of the Toolkit always provides the direct links to relevant studies, measures, case analyses or databases.

Nevertheless, for the convenience of users who prefer to consult material in hard copy format, a shortened “highlights” version is issued in regular intervals.

YOUR INPUT REQUIRED: Report a scientific study or home-country measure, give feedback and join the growing community of practice on OFDI.

To keep the Toolkit updated and provide as much detailed information and resources on home-country measures as possible, we encourage users of the Toolkit to report any empirical or scientific studies or home-country measures that are new or not yet included in the Toolkit. Any suggestions can be submitted here at any time. The proposed studies and HCMs will be examined for suitability and incorporated in the Toolkit as appropriate.

In addition, we encourage users to provide feedback on the Toolkit. This feedback will be greatly valued to improve the Toolkit, and to ensure it provides the types of information, advice and functionality that users need and want. Feedback can be submitted here at any time and will be thoroughly appreciated and considered. 

In parallel with the publication of the Toolkit, we are developing a community of practice on OFDI, home-country effects and HCMs. Members of this community of practice are government officials, policymakers, international organisations, researchers, scientists, firms and other stakeholders with interest in these subjects. The community of practice consists of a mailing list, provides opportunities for networking, cooperation and coordination among its members, and is a platform for the exchange of knowledge and information on OFDI, home-country effects and HCMs. We encourage users of the Toolkit to join this growing community of practice by signing up here.