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OFDI activity and urban-regional development cycles: a co-evolutionary perspective

Harald Bathelt (Department of Geography and Planning, University of Toronto, Toronto, Canada)
Maximilian Buchholz (Graduate School of Design, Harvard University, Cambridge, Massachusetts, USA)
John A. Cantwell (Rutgers Business School and Division of Global Affairs, Rutgers University, Newark, New Jersey, USA)

Competitiveness Review

ISSN: 1059-5422

Article publication date: 27 July 2022

Issue publication date: 24 March 2023




While conventional views of foreign investment activity primarily relate to efficiency-seeking investments, the authors argue that most other outward foreign direct investments (OFDIs) likely have positive effects on income development in the home region. Data on the US urban system not only illustrates this but also shows that this impact is not equal in all city-regions. The purpose of this paper is to develop an explanation as to why high- and low-income cities are associated with self-reinforcing cycles of OFDI activity that have different home-region impacts.


Conventional views assume that inward foreign direct investments (IFDIs) have a positive impact on target regions, while OFDIs are often treated as the flip side of this story, being seen as having negative effects by shifting jobs and income abroad. This paper counters this logic by developing a conceptual argument that systematically distinguishes different types of OFDIs and relates them to economic development effects in the home (investing) region.


Using a co-evolutionary conceptualization, this paper suggests that many high-income cities are characterized by a virtuous cycle of development where high, successful OFDI activity generates both positive income effects as well as incentives to engage in further OFDIs in the future, thus leading to additional income increases. In contrast, it is suggested that low-income cities are characterized by what we refer to as vicious cycles of development with low OFDI activity, few development impulses and a lack of incentives and capabilities for future investments.


This paper develops a counter-perspective to conventional views of OFDI activity, arguing that these investments have a positive impact on regional income levels. The authors develop a spatially sensitive explanation which acknowledges that OFDIs do not trigger a linear process but are associated with diverging inter-urban development paths and may contribute to higher levels of intra-urban inequality. From these findings, the authors derive conclusions for future research and public policy.



This paper, to which all authors contributed equally, was financially supported by a Canadian Social Sciences and Humanities Research Council (SSHRC) Insight Grant (File Number 435–2019-0273). The authors wish to thank Ruilin Yang, two anonymous Reviewers and the Editors of the Special Issue for critical comments and suggestions on an earlier draft.


Bathelt, H., Buchholz, M. and Cantwell, J.A. (2023), "OFDI activity and urban-regional development cycles: a co-evolutionary perspective", Competitiveness Review, Vol. 33 No. 3, pp. 512-533.



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