Spatial complexity and interactions in the FDI attractiveness of regions

In this study we argue that the capacity of regions to attract FDI is affected by the own-country effect, which can take two different forms: the first relates to the relative performance of the country of which the region is part (the between-country effect); the second concerns the relative performance of regions within their own countries (the within-country effect). By using spatial econometrics techniques we demonstrate that the own country effect exists. However, while the within effect is always positive, the between one may be either positive or negative. This means that successful regions in unsuccessful countries generally enjoy an extra-FDI premium, while regions in successful countries do not necessarily do so.