This chapter presents a Policy Toolkit to help governments channel foreign direct investment (FDI) into productivity-enhancing activities and promote productivity and innovation spillovers on small and medium-sized enterprises (SMEs). The chapter describes the various transmission channels through which FDI affects productivity and innovation as well as contextual factors determining the magnitude and direction of such impacts. It also provides a thorough overview of policies and institutions at the intersection of investment and other complementary policies that can enhance the impacts of FDI on productivity and innovation.