Abstract
While the conventional view primarily relates to efficiency-seeking investments, we argue that most other OFDIs likely have positive effects on income development in the home region. Data on the U.S. urban system illustrates this but also shows that this impact is not equal in all city-regions. We develop an explanation as to why high-income and low-income cities are associated with self-reinforcing cycles of OFDI activity that have different home-region impacts.. Conventional views assume that inward foreign direct investments (IFDIs) have a positive impact on target regions while outward foreign direct investments (OFDIs) are often treated as the flip side of this story, being seen as having negative effects by shifting jobs and income abroad. This paper counters this logic by developing a conceptual argument that systematically distinguishes different types of OFDIs and relates them to economic development effects in the home (investing) region.. Employing a co-evolutionary conceptualization, the paper suggests that many high-income cities are characterized by a virtuous cycle of development where high, successful OFDI activity generates both positive income effects as well as incentives to engage in further OFDIs in the future, thus leading to additional income increases. In contrast, it is suggested that low-income cities are characterized by what we refer to as vicious cycles of development with low OFDI activity, few development impulses and a lack of incentives and capabilities for future investments.. This paper develops a counter-perspective to conventional views of OFDI activity, arguing that these investments have a positive impact on regional income levels. We develop a spatially-sensitive explanation which acknowledges that OFDIs do not trigger a linear process but are associated with diverging inter-urban development paths and may contribute to higher levels of intra-urban inequality. From these findings, we derive conclusions for future research and public policy.