Global Investments and Regional Development Trajectories: The Missing Links

TLDR: In this article, the authors present a picture of the geography of foreign investments from and to the European regions and its change after the financial and economic crisis in 2008, and shed some initial light on how the operationalisation of regional connectivity can improve our empirical understanding of the evolution of regional economies and the policy approach needed to support their reaction to change.

Abstract: Regional economic development has been long conceptualised as a non-linear, interactive and socially embedded process: these features were traditionally regarded as spatially mediated and highly localised. However, unprecedentedly fast technological change coupled with the intensification of global economic integration processes has spurred the need to place regional development in a truly open and interdependent framework. Despite substantial progress made by the academic literature, rethinking regional development in this perspective still presents a number of challenges in terms of concepts, empirical evidence and policy approaches. Following an interdisciplinary assessment of how openness and connectivity – proxied by one particular of the many cross-border flows, i.e. global investments – interact with regional economic development trajectories, this paper presents a picture of the geography of foreign investments from and to the European regions and its change after the financial and economic crisis in 2008. This simple exercise allows us to shed some initial light on how the operationalisation of regional connectivity can improve our empirical understanding of the evolution of regional economies and the policy approach needed to support their reaction to change.

Figures

Figure 4. Changes in foreign direct investment originating from the regions of Europe after the crisis (differences in capital expenditure between 2003–08 and 2009–14). Source: Authors’ elaboration of fDi Markets data.

Figure 3. Changes in foreign direct investment towards the regions of Europe after the crisis (differences in capital expenditure between 2003–08 and 2009–14). Source: Authors’ elaboration of fDi Markets data.

Figure 2. Foreign direct investment originating from the regions of Europe (cumulative outward capital expenditure, 2003–14, US$ millions). Source: Authors’ elaboration of fDi Markets data.

Table 4. Nature of outward foreign direct investment (FDI) originating from the regions of Europe before the crisis (shares of business activities by class of change in capital expenditure (CapEx)).

Table 5. Nature of outward foreign direct investment (FDI) originating from the regions of Europe after the crisis (shares of business activities by class of change in capital expenditure (CapEx)).

Table 1. Spatial extent of foreign direct investment (FDI) in the regions of the European Union (EU) (changes in FDI to/from different groups of regions).

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Riccardo Crescenzi and Simona Iammarino
Global investments and regional
development trajectories: the missing links
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Crescenzi, Riccardo and Iammarino, Simona (2017) Global investments and regional
development trajectories: the missing links.Regional Studies, 51 (1). pp. 97-115. ISSN 0034-
3404
DOI: 10.1080/00343404.2016.1262016
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Global investments and regional development
trajectories: the missing links
Riccardo Crescenzi & Simona Iammarino
To cite this article: Riccardo Crescenzi & Simona Iammarino (2017) Global investments and
regional development trajectories: the missing links, Regional Studies, 51:1, 97-115, DOI:
10.1080/00343404.2016.1262016
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Global investments and regional development trajectories:
the missing links
Riccardo Crescenzi
a
and Simona Iammarino
b
ABSTRACT
Global investments and regional development trajectories: the missing links. Regional Studies. Regional economic
development has been long conceptualized as a non-linear, interactive and socially embedded process: these features
were traditionally regarded as spatially mediated and highly localized. However, unprecedentedly fast technological
change coupled with the intensification of global economic integration has spurred the need to place regional
development in a truly open and interdependent framework. Despite substantial progress in the academic literature,
rethinking regional development in this perspective still presents a number of challenges in terms of concepts, empirical
evidence and policy approaches. Following an interdisciplinary assessment of how openness and connectivity – proxied
by one of the many cross-border flows, i.e., global investments – interact with regional economic development
trajectories, this paper presents a picture of the geography of foreign investments from and to the European regions
and its change after the financial and economic crisis in 2008. This simple exercise sheds some initial light on how the
operationalization of regional connectivity can improve one’s empirical understanding of the evolution of regional
economies and the policy approach needed to support their reaction to change.
KEYWORDS
foreign direct investment (FDI); regions; local–global connectivity; regional development; Europe
摘要
全球投资与区域发展轨迹：遗失的连结。Regional Studies. 区域经济发展长期以来被概念化为非线性、互动且镶嵌于
社会的过程：这些特徵传统上被认为受到空间中介且高度在地化。但前所未有的快速科技变迁，伴随着全球经济整
合的加剧，刺激了将区域发展置放于真正开放且相互?依赖的架构之需求。尽管学术文献已有了实质的进展，但透过
上述观点再思考区域发展，仍然在概念、经验证据与政策方法上呈现诸多挑战。本文追随开放性与连结性 –由诸多全
球投资的跨界流动之一进行代理 –如何与区域经济发展轨迹互动的跨领域评估，呈现一个来自欧洲区域与进入欧洲区
域的外国投资地理图像，及其在2008年金融与经济危机之?后的改变。此一简易的操作，对区域连结的操作化如何能
够促进我们对区域经济的演化之经验性理解，以及支持其回应变迁所需的政策方法，提供若干的初步说明。
关键词
外国直接投资（FDI）; 区域; 地方—全球连结; 区域发展; 欧洲
RÉSUMÉ
Les investissements mondiaux et les trajectoires de l’aménagement du territoire: les chaînons manquants. Regional Studies.
Depuis longtemps le développement économique régional a été conceptualisé comme un processus interactif non-linéaire
qui est bien intégré sur le plan social: par le passé ces caractéristiques-là étaient considérées très influencées par l’espace et
par la localisation. Cependant, l’évolution technologique à un rythme sans précédent conjointement avec l’intensification
de l’intégration économique mondiale a stimulé la nécessité de mettre l’aménagement du territoire au sein d’un cadre
vraiment ouvert et interdépendant. En dépit du progrès significatif évident dans la litérature spécialisée, repenser
l’aménagement du territoire de ce point de vue pose un nombre de défis en termes des notions, des preuves
© 2017 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted
use, distribution, and reproduction in any medium, provided the original work is properly cited.
CONTACT
a
r.crescenzi@lse.ac.uk
Department of Geography and Environment, London School of Economics, London, UK.
b
(Corresponding author) s.iammarino@lse.ac.uk
Department of Geography and Environment, London School of Economics, London, UK.
REGIONAL STUDIES, 2017
VOL. 51, NO. 1, 97–115
http://dx.doi.org/10.1080/00343404.2016.1262016

empiriques, et des approches politiques. Suite à une évaluation interdisciplinaire de comment l’ouverture et la connexité
-représentées par l’un des nombreux flux transfrontaliers – interagissent avec les trajectoires du développement
économique régional, cet article présente une image de la géographie des investissements étrangers en provenance et à
destination des régions européennes, et de son évolution depuis la crise financière et économique de 2008. Cette
simple analyse éclaircit dans un premier temps comment l ’ opérationalisation de la connectivité régionale permet de
mieux comprendre empiriquement le développement des économies régionales et de l’approche politique qu’il faut
pour soutentir leur réaction au changement.
MOTS-CLÉS
investissement direct étranger (IDE); régions; connectivité localo–mondiale; aménagement du territoire; Europe
ZUSAMMENFASSUNG
Abläufe von globalen Investitionen und regionaler Entwicklung: die fehlenden Verbindungsglieder. Regional Studies. Die
regionale Wirtschaftsentwicklung wurde lange als nichtlinearer, interaktiver und gesellschaftlich eingebetteter Prozess
aufgefasst: diese Merkmale galten traditionell als räumlich vermittelt und hochgradig lokalisiert. Aufgrund des sich
schneller denn je vollziehenden technischen Wandels – gekoppelt mit der Intensivierung der weltweiten wirtschaftlichen
Integrationsprozesse – ist es jedoch notwendig geworden, die Regionalentwicklung in einen wirklich offenen Rahmen von
Wechselbeziehungen zu stellen. Trotz erheblicher Fortschritte in der akademischen Literatur ist eine Neuorientierung der
Regionalentwicklung an dieser Perspektive nach wie vor mit einer Reihe von Herausforderungen verbunden, was
Konzepte, empirische Belege und politische Ansätze anbelangt. Im Anschluss an eine interdisziplinäre Bewertung der
Frage, wie Offenheit und Verbundenheit – vertreten durch einen von zahlreichen grenzüberschreitenden Strömen,
nämlich weltweiten Investitionen – mit den Abläufen der regionalen Wirtschaftsentwicklung zusammenwirken, wird in
diesem Beitrag ein Abbild der Geografie ausländischer Investitionen von und in europäische Regionen sowie ihrer
Veränderungen nach der Finanz- und Wirtschaftskrise von 2008 vorgestellt. Diese einfache Aufgabe ermöglicht eine erste
Klärung der Frage, wie die Operationalisierung der regionalen Verknüpfungen das empirische Verständnis der Evolution
regionaler Ökonomien und des erforderlichen politischen Ansatzes zur Unterstützung ihrer Reaktionen auf
Veränderungen verbessern kann.
SCHLÜSSELWÖRTER
ausländische Direktinvestitionen (ADI); Regionen; lokal-globale Verknüpfungen; Regionalentwicklung; Europa
RESUMEN
Trayectorias de inversiones globales y desarrollo regional: los eslabones perdidos. Regional Studies. El desarrollo económico
regional suele ser conceptualizado como un proceso no lineal, interactivo y socialmente integrado: estas características se
solían considerar como espacialmente mediadas y altamente localizadas. Sin embargo, debido al rápido cambio técnico sin
precedentes junto con la intensificación de la integración económica global, ha surgido la necesidad de colocar el desarrollo
regional en un marco realmente abierto e interdependiente. Aunque en la bibliografía académica se han realizado grandes
avances, el replanteamiento del desarrollo regional a este respecto todavía presenta una serie de retos en términos de
conceptos, evidencia empírica y enfoques políticos. Tras una valoración interdisciplinaria sobre cómo la transparencia y
la conectividad -representadas por uno de los muchos flujos transfronterizos, es decir, las inversiones globales -
interactúan con las trayectorias regionales de desarrollo económico, en este artículo presentamos una imagen de la
geografía de las inversiones extranjeras desde y hacia las regiones europeas, así como de los cambios después de la
crisis financiera y económica en 2008.Este simple ejercicio nos permite una primera aclaración de la cuestión de cómo
la operacionalización de la conectividad regional puede mejorar el entendimiento empírico de la evolución de las
economías regionales y el enfoque político necesario para apoyar su reacción al cambio.
PALABRAS CLAVES
inversión extranjera directa (IED); regiones; conectividad local y global; desarrollo regional; Europa
JEL F2, O3, O19, O52, R11, R12
HISTORY Received 19 May 2016; in revised form 3 November 2016
INTRODUCTION
The recent literature on regional economic development
has reached a consensus on the idea that spatial proximity,
density and localized processes should be placed in the
wider context of economic globalization by accounting
for other forms of proximity between local and non-local
agents (e.g., Crescenzi, Nathan, & Rodríguez-Pose,
2016b; Huber, 2012; Uyarra, 2011). Regional economic
and innovation trajectories do not depend exclusively on
localized productive and knowledge assets, but need to
combine ‘local buzz’ ( Storper & Venables, 2004) and
98 Riccardo Crescenzi and Simona Iammarino
REGIONAL STUDIES

‘global pipelines’ (Bathelt, Malmberg, & Maskell, 2004).
The latter are non-spatially bounded linkages and networks
that channel and diffuse new and valuable knowledge
across space. For the development of these links geographi-
cal proximity constitutes ‘neither a necessary nor a sufficient
condition’ (Boschma, 2005, p. 62), while other non-spatial
relations – i.e., cognitive, organizational, social and insti-
tutional – play a crucial role as complements and/or substi-
tutes of physical closeness (e.g., Crescenzi et al., 2016b;
D’Este, Guy, & Iammarino, 2013).
A significant role in the establishment and governance
of such pipelines is attributed to multinational enterprises
(MNEs) as major ‘flagships’, or connectors, in global pro-
duction networks (GPNs) (e.g., Coe, Hess, Yeung,
Dicken, & Henderson, 2004, 2008; Dicken, 1994, 2003,
2007; Dicken & Henderson, 2003; Ernst & Kim, 2002;
Henderson, Dicken, Hess, Coe, & Yeung, 2002; Hess &
Yeung, 2006; Hobday, Davies, & Prencipe, 2005; Wrigley,
Coe, & Currah, 2005; Yeung, 2009). The GPN approach
combines the insights of various similar perspectives that
capture the spread of value-added creation and distribution
across firm boundaries and geographical borders, such as
those of global commodity chains (GCCs) and global
value chains (GVCs) (e.g., Gereffi, 2005; Gereffi &
Kaplinsky, 2001 ; Gereffi & Korzeniewicz, 1994; Gereffi,
Humphrey, & Sturgeon, 2005).
1
Despite considerable academic advances in reconciling
firms’ cross-borders organizational networks with space-
specific assets and institutional structures – i.e., the ‘stra-
tegic coupling’ process that ultimately drives contemporary
regional economic development (e.g., Coe et al., 2004,
2008; Yeung, 2009, 2016) – still substantial gaps are left
in the literature, particularly when looking for global–
local frameworks for the ‘diagnosis’ of local economic
conditions and the design of public policies. This paper
contributes to filling this gap by conceptually and critically
discussing the heterogeneity of regional openness and
connectivity – here intended in terms of global investment
flows – through the lenses of an ‘integrated framework’ for
the analysis of local economic development (Crescenzi &
Rodríguez-Pose, 2011) that systematically links localized
regional assets and socio-institutional features with global
connectivity. As an empirical example of how global
investment flows are connected to regional trajectories
and their change, the paper describes the relative position
of the sub-national regions of the European Union (EU)
in the inflows and outflows of greenfield foreign direct
investment (FDI) to and from the area. By using infor-
mation from the fDi Markets-Financial Times database
for 2003–14, the paper follows up on previous work and
classifies regions in a dynamic perspective, looking in par-
ticular at different stages of the value chain, or functions
(e.g., Crescenzi, Pietrobelli, & Rabellotti, 2014; Sturgeon,
2008), before and after the 2008 financial crisis. The het-
erogeneity of (short-term) regional development trajec-
tories and global connectivity patterns can offer some
initial insights towards a more critical and nuanced
interpretation of how regions react to shocks, and sheds
some initial light on the importance of a more careful
coordination of bottom-up and top-down place-based
development policies.
The paper is organized as follows. The following sec-
tion provides a snapshot of the academic debate on the
interdependence of corporate and geographical connec-
tions and linkages, and highlights similarities in govern-
ance issues that both firms and regions are confronting.
It focuses on three dimensions of connectivity – spatial
extent, nature and directionality – and relates the concept
with regional economic development. The third section
presents some descriptive evidence of the geography of
foreign
investment flows in and from the EU over 2003–
14, attempts a dynamic classification of EU regions in
terms of connectivity measured by these flows before and
after the recent financial and economic crisis, and tenta-
tively links these regional typologies to regional develop-
ment trajectories. The fourth section concludes,
highlighting some possible implications for public policies
and the challenges ahead in the analysis of global–local
interdependence.
GLOBAL FIRMS’ NETWORKS AND
REGIONAL CONNECTIVITY
Connectivity and global investment flows:
spatial extent, nature and directionality
Three key features of the current phase of economic globa-
lization have direct geographical implications (Iammarino
& McCann, 2013). First, the share of developing and
emerging economi es on global FDI flows has grown stea-
dily and, for the first time in history, accounted for more
than half the world’s total inflows in 2012 (55% in
2014), and more than one-third of total outflows in
2014, confirming a massive transformation in the geogra-
phy of foreign investment worldwide (United Nations
Conference on Trade and Development (UNCTAD),
2015), and in European regions in particular (Crescenzi,
Pietrobelli, & Rabellotti, 2016c). Second, the majority of
these cross-border flows span neighbouring economies,
rather than being genuinely global transactions. This global
regionalism is also characterized by the slicing up and
recombination of GVCs in which establishments and
groups of activities are ‘unbundled’ (Baldwin, 2011)
primarily across groups of neighbouring economic
systems (e.g., Guy, 2009 , 2015; Rugman, 2005). Third,
around two-thirds of global FDI stocks are now in service
industries (63% in 2012), with the remaining one-third
involving manufacturing. Services liberalization, their
increasing tradability due to information and communi-
cation technology (ICT) technologies, and the steady rise
of GPNs/GVCs spurring the internationalization of
services related to manufacturing, have all implied a sub-
stantial redistribution of comparative advantages across
countries and regions, mirroring that of global gross
domestic product (GDP) (UNCTAD, 2015).
Vertical disintegration, international outsourcing and
offshoring have emerged as predominant modes of control
and coordination of MNE activities, giving rise to what has
been labelled the ‘concentrated dispersion ’ of geographical
Global investments and regional development trajectories: the missing links 99
REGIONAL STUDIES