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# 1. Introduction

Beyond attracting higher levels of foreign direct investment (FDI), developing countries are increasingly concerned with investment that helps advance their socio-economic development and environmental sustainability. Calls for “quality FDI” or the “right kind of FDI” reflect a desire that goes beyond attracting foreign capital, to creating more and better jobs, skills and know-how, opportunities for women and domestic firms and respect for the environment. These expectations have not always been realized or have not been evenly distributed across the population in a country. Worse still, at times foreign multinationals have been associated with environmental and social costs (UNCTAD, 1999). While FDI is generally associated with positive effects on development, there is a broad consensus in the literature that materialization of these effects is neither automatic (Alfaro and Chauyin 2018) nor monotonic; it varies considerably across various types of enterprises, sectors, regions and countries. Moreover, even when FDI supports development in the aggregate, it does not ensure that everyone benefits from the activities of foreign multinationals.

In this context, investment promotion and strategy require nuance, and above all, a solid empirical framework to monitor the contribution of investment to a broad-based development agenda. This need is even greater in the context of the ambitious set of Sustainable Development Goals (SDGs) looking forward to 2030, which will require bridging an acute investment gap in the range of trillions—by some conservative estimates, USD 2.5 trillion annually for developing countries (UNCTAD 2014)—and, importantly, finding ways to make the most of incoming capital for social and economic progress, often by changing established ways of doing business. While public investments will continue to play a central role for most developing countries, for least-developed countries (LDCs) especially, the role of private—notably foreign—investment will be indispensable to advance developmental objectives.

But how do we measure the contributions of foreign multinationals to development? While there has been a proliferation of cross-country indicators related to investment policies and business environment conditions, a lot fewer indicators exist on measurements of investment outcomes across countries and sectors—a compass to tell how different multinational firms fare in one country versus another, and where each country stands relative to its own development objectives. An ample amount of literature has demonstrated the direction and magnitude of effects of foreign multinationals on job creation, wages, productivity, and innovation in specific contexts, periods, or sectors. Yet, what is lacking to date are consistent measurement and benchmarking of these development outcomes of international business across countries.

This study aims to fill this information gap. It takes advantage of rich sources of data collected by the World Bank Enterprise Surveys over the past decade to measure differences between foreign multinational and domestic firms consistently across 63 countries over 10 dimensions that matter for development. These dimensions have been selected based on their importance