The chapter reflects about the interactions between industrial policy and FDI. More specifically, the authors address two questions: How can FDI be used as an industrial policy instrument? How does industrial policy address FDI to enhance its contribution towards countries’ structural change goals? To respond these questions, the authors use an adapted version of the typology of FDI presented by Dunning, which encompasses four types of FDI: resource-seeking; market-seeking; efficiency-seeking; and strategic asset-seeking. Then, the authors combine this typology with their classification of economic development goals to assess the alignment of FDI with different strategies for the development of national productive capacities. Three basic development levels and policy concerns have been identified: building-up capabilities, catching-up, and sustained technology leadership. The authors develop a discussion of FDI as an industrial policy tool. Then the chapter deals with policies to enhance FDI’s contribution to countries’ structural change and competitiveness. This is developed in two steps: the identification of the main policy concerns regarding FDI, and then a discussion about the involvement by MNEs in industrial policy measures.

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