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Connecting FDI and SMEs for Productivity and Innovation in Europe
This report analyses how foreign direct investment (FDI) influences productivity and innovation among small and medium-sized enterprises (SMEs) across the European Union. Drawing on rich subnational and firm-level data, it maps the geography of FDI, explores how recent shocks and the rise of digital and clean-energy industries are reshaping investment patterns, and examines the regional conditions that help attract FDI and translate inflows into SME productivity gains. It investigates the concentration of FDI in a few well-connected hubs compared with its more limited reach elsewhere, and considers how factors such as skills, innovation systems, infrastructure and competitive SME ecosystems affect the extent to which FDI generates supplier linkages, technology transfer and productivity improvements. The report outlines policy directions to broaden the regional reach of FDI and enable local firms to capture greater value through skills upgrading, supplier development and targeted investment-promotion strategies.
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