SMEs and entrepreneurship

FDI-SME ecosystems: a policy toolkit for harnessing linkages and spillovers


The OECD in collaboration with the European Commission is developing a Policy Toolkit that offers policy advice to national and sub-national governments on how to increase productivity and innovation spillovers from foreign direct investment (FDI) to domestic small and medium-sized enterprises (SMEs) and local economy. 

Understanding FDI-SME spillovers: A conceptual framework 



The FDI-SME project aims to:

  • Understand the main diffusion channels through which FDI affects the productivity and innovation of local SMEs;

  • Understand the enabling conditions of FDI-SME spillovers, i.e. the qualities of FDI that countries and regions attract, the absorptive capacity of domestic SMEs, and industrial, economic and economic geography factors;

  • Identify and assess the main institutions and policies in place in EU countries and regions which can act upon these channels and conditions;

  • Provide governments at national and subnational levels with benchmarking and diagnostic tools of FDI-SME diffusion;

  • Formulate policy advice on how to enhance the impact of FDI on domestic SME productivity and innovation. 


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Why a policy toolkit for harnessing FDI-SME linkages and spillovers?

Boosting productivity and innovation requires fostering FDI-SME ecosystems. International investment and domestic SMEs are interlinked. Foreign Direct Investment (FDI) can help SMEs increase productivity and innovation, through knowledge and technology spillovers. SMEs and their innovation capacities are an important determinant for FDI location.

Strengthening FDI-SME linkages and spillovers has become even more important in a post COVID-19 recovery phase, as firms and places look for competitiveness and resilience within domestic and global value chains.

Governments at national and sub-national levels have a crucial role to play in creating the incentives for FDI-SME linkages, and setting conducive institutional, regulatory and policy frameworks for spillovers. As public intervention takes place at the crossroad of investment promotion, innovation, SME and entrepreneurship, and regional development policies, coordination is key.

The Policy Toolkit will help policy-makers improve the effectiveness of their intervention. Effective policies require a better understanding of the diffusion channels through which FDI affects the productivity and innovation of local SMEs, as well as the enabling conditions that can foster linkages and spillovers, and an assessment of the relevant policies and institutions in place.




  • 07 July: IC-CSMEE webinar on FDI-SME linkages and spillovers in Portugal.
  • 13 October: Policy dialogue on the SMEs of tomorrow. SME internationalisation: FDI-SME linkages.
  • Q4: Finalisation of the Portugal assessment.
  • Q4: Preliminary discussions on the Slovak Republic assessment.
  • Q4: First draft Analytical report.

 Q1 2022

  • Launch of the Slovak Republic pilot assessment.
  • Launch of the Policy Toolkit at an international conference.





The FDI-SME project will provide policymakers with a Policy Toolkit to act upon key FDI-SME diffusion channels through appropriate policies. The Policy Toolkit will consist of the following six elements:

  • A conceptual framework for understanding FDI-SME spillovers and identifying diffusion channels and enablers.

  • A checklist of questions for policymakers interested in fostering FDI-SME linkages.

  • Diagnostic tools to assess the potential for spillovers in countries and regions, and the effectiveness of diffusion channels.

  • An assessment tool of policy, regulatory and institutional frameworks enabling FDI-SME diffusion channels, with a typology of policy initiatives that can increase the impact of FDI spillovers.

  • An analytical report providing an overview of national policy approaches to strengthen FDI-SME spillovers, based on the findings of an international mapping of policies and institutions in place across the 27 EU Member States.



The FDI-SME project is conducted in cooperation and with the support of the European Commission (EC)’s Directorate General for Regional and Urban Policy (DG REGIO).

It is developed jointly by the OECD Centre for Entrepreneurship, SMEs, Regions and Cities (CFE/EST) and the OECD Directorate for Financial and Enterprise Affairs (DAF/INV) under the aegis of the OECD Committee on SMEs and Entrepreneurship (CSMEE), and the OECD Investment Committee (IC).






If you are interested to learn more about the project or to get involved, please contact:




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