Is FDI Beneficial for Development in any Case: an Empirical Comparison between Greenfield and Brownfield Investments

Abstract

In literature, the "quality" of FDI rather than its "quantity" was started to be focused on in order to be beneficial for economic development. One of the indicators of FDI's "quality" is accepted as its "mode of entry", greenfield or brownfield investments. The paper argues that greenfield investment is more useful for development in order to have its direct positive impact through investment. The paper empirically investigates this by a cross-section data analysis. The main findings support this argument. Findings also back the argument that brownfield can be beneficial for development in the long-run in relation with human capital development. JEL Classification: F21; F23; G34; O40ÖZET: Literatürde, ekonomik kalkınmaya yararlı olması amacıyla DYY'nin "niceliği"nden çok "niteliği"ne odaklanılmaya başlanmıştır. DYY'nin niteliğinin bir göstergesi olarak DYY'nin "giriş şekli" (yeşil alan ya da kahverengi alan yatırımları) kabul edilmektedir. Çalışma, yatırım kanalıyla doğrudan olumlu etkisine sahip olmak amacıyla yeşilalan yatırımının kalkınma için daha yararlı olduğunu savunmaktadır. Çalışma bunu ampirik olarak bir yatay kesit veri analizi ile araştırmaktadır. Ana sonuçlar bu argümanı desteklemektedir. Aynı zamanda bulgular kahverengi alan yatırımının insan sermayesinin gelişimi ile ilişkili olarak uzun vadede kalkınma için yararlı olabildiği argümanını da desteklemektedir.

An Economic Analysis of Brownfield and Greenfield Industrial Parks Investment Projects: A Case Study of Eastern Slovakia

“…Economic, social, and environmental benefits and costs associated with a brownfield and greenfield redevelopment in the Greater Toronto Area, Canada were compared, while brownfield redevelopment resulted in benefits to citizens and the main benefit was avoiding high transportation costs for people living in the peripheral greenfield areas and keeping the industrial development away from greenfields [61]. Opposite to this statement is the finding of a Turkish study that greenfield investment is more useful for the economic growth as greenfield investments do not require additional costs, while brownfield investments need to have a direct impact on economic development [62].…”