My thesis will focus on governmental incentives for foreign direct investment (FDI) and the corresponding international competition. The principal reason why governments grant subsidies to multinational companies (MNC) lies in their expectation of productivity externalities spilling over from MNCs to local firms. These effects are hardly internalizable, that is why governments are believed to be entitled to try to attract more FDI than would correspond to the market equilibrium. Thus, many scholars argue that the global level of incentives is above-optimal and that supranational coordination would reduce it. I will try to show whether this really has to be the case; I will also attempt to empirically verify my models. I will inquire into intra-industry FDI spillovers in a large quantitative literature survey. I am going to use data from the World Competitiveness Report, World Bank’s World Development Indicators, and additionally collect some data myself.Zanzibar University