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By Eric Rugraff, Diego Sánchez-Ancochea, Andy Sumner (eds.)

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South-South FDI may also lead to policy regimes that maximise the positive effect of FDI. Developing and emerging economies have a less unequal negotiating relationship between themselves (and their TNCs) and are able to extract benefits not possible in negotiation with larger, more powerful TNCs from developed countries. In short, there is likely to be more space to pursue policies that might be unthinkable with Northern TNCs. One of the most significant trends in the last few years is the emergence of China as a primary source of FDI for developing countries all over the world.

Countries belonging to the civil law tradition should engage in a modification of their legal systems and facilitate the ‘ease of doing business’ by dismantling the barriers that impede the market mechanisms. However, long-run economic development requires more than economic freedom. Market-creating institutions are insufficient to sustain growth, to generate resilience to shocks and make these shocks socially acceptable. , 2002). East Asia, unlike Latin America and sub-Saharan African countries, did not suffer a growth decline 36 Transnational Corporations and Development Policy between 1960–75 and 1975–89, thanks to the solidity of their stabilising and legitimising institutions (Rodrik, 1999b): the countries that experienced the sharpest drops were those with weak market stabilising institutions and market legitimising institutions.

The second section explores the relationship between FDI and growth in developing and transition countries and the third section the pre-conditions to maximise the impact. 5 between Transnational Corporations (TNCs) and the indigenous firms. 6 insists on the necessity to further investigate the question of impact by using the case study method. 7) sums up ‘what we know’ and ‘what we do not know’ about the impacts of FDI. 1 Studying the direct links between FDI and growth What does the empirical literature tell us about the macroeconomic impact of FDI on growth of the developing and transition countries?

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