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How can foreign investments contribute to regional innovation ecosystems?

Many countries and regions have adopted the cluster development approach, in which a cluster is defined as a geographically bounded concentration of interconnected firms and institutions in a particular technological field. The cluster approach has many advantages for potential investors such as access to specific knowledge through dedicated institutes and networks, availability of specialised personnel and suppliers and proximity of dedicated R&D infrastructures/research facilities. Clusters lead to healthy competition between companies and among personnel, boosting motivation and innovation. Attracting FDI is particularly in the development and growth phases of a regional cluster the most valuable.
Literature on FDI and examples around the world show that foreign investments have special features, which include efficient and leading operating practices and technologies, which generate positive spill-over effects to domestic firms and the regional economy as a whole. Buck Consultants International identified four FDI spill-over channels, which lead to better skilled talent, more productive domestic companies, intensified collaboration/sourcing and a more robust R&D infrastructure.


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