FDI and cities: network dynamics in cleantech innovation

Abstract

Purpose The purpose of this paper is to understand the relationship between foreign direct investment (FDI) and cities and how the relationship between multinational enterprise (MNEs) and local firms facilitates regional cleantech innovation. Design/methodology/approach Using a combination of social network analysis, regression analysis and interview analysis, the authors map and analyze a cleantech cluster to investigate the relationship between MNEs and local firms and the resulting effects on cleantech innovation. Findings The findings of the paper indicate that FDI plays a crucial role in cities and their local clusters by acting as a broker between a diverse set of actors: firms, institutions, universities, financial and other intermediaries. Additionally, connectedness to MNEs improves local firms’ innovation. Research limitations/implications This study is not free of limitations, mainly, because of the aspects that the analysis is based on one city and one cleantech hub. Further research could verify whether the findings of this paper hold in other cities and industries. Practical implications The findings, elucidating the connection between MNEs and local firms, as well as MNEs being important brokers in the local system, and the resulting impact, will help policymakers to take appropriate actions and support the local cleantech innovation. It is important to not only attract high-quality FDI into local clusters, but also to create and support collaborations between foreign firms and local actors, because colocation does not automatically leads to positive spillovers and a lot depends on how MNEs are integrated into the local milieu. Social implications The present paper argues that FDI plays an important role in local cleantech innovation and it is important to integrate foreign firms in local social networks. Originality/value The authors analyze FDI patterns in an emerging industry at the city and local cluster level using a unique database containing the information on relationships between MNEs and local firms, as well as interview data.