Foreign Direct Investment. A Review of the Determinants and Economic Effects

Table of Contents

1. Introduction

2. Theoretical Background

2.1 Foreign Direct Investment

2.1.1 Definition

2.1.2 Conceptual Foundation

2.2 The Eclectic Paradigm

2.3 Economic Effects

3. Method: Theoretical and Analytical Procedure

4. Results

4.1 Drivers of Foreign Direct Investment

4.1.1 Political Drivers

4.1.2 Economic Drivers

4.1.3 Social and Cultural Drivers

4.1.4 Geographical Drivers

4.2 Economic Effects of Foreign Direct Investment

4.2.1 Direct Effects

4.2.2 Indirect Effects

4.3 Dependencies Between Drivers and Effects

5. Conclusion and Research Directions

5.1 Theoretical Implications

5.2 Managerial Implications

5.3 Limitations and Future Research

Objectives and Research Themes

This thesis aims to provide a comprehensive conceptual overview of the primary drivers and economic effects of foreign direct investment (FDI). It explores how host countries can strategically influence controllable factors to attract FDI while managing its economic impact, specifically addressing the bidirectional relationship between FDI and economic growth.

• The hierarchical classification of FDI drivers based on host-country controllability.
• The distinction between direct and indirect economic effects of FDI.
• The role of human capital and other thresholds in shaping the FDI-economic growth relationship.
• The interdependence between political, economic, social, and geographical determinants.
• The identification of research gaps in existing literature regarding the simultaneous analysis of drivers and effects.

Excerpt from the Book

Summary of Chapters

1. Introduction: This chapter highlights the relevance of FDI for sustainable development goals and addresses the observed decline in investment flows, which necessitates a deeper understanding of investment drivers.

2. Theoretical Background: This section establishes the conceptual foundation by defining FDI and explaining the OLI paradigm as the core framework for understanding international production.

3. Method: Theoretical and Analytical Procedure: This chapter outlines the three-step literature review process, including the acquisition of information, quality assessment based on journal rankings, and the establishment of concept matrices.

4. Results: This chapter presents an analysis of FDI determinants categorized by controllability, followed by an exploration of direct and indirect economic effects and the interdependencies between these factors.

5. Conclusion and Research Directions: This final section synthesizes the theoretical and managerial implications of the findings and identifies future research opportunities, particularly concerning data limitations and the impact of digitalization.

Keywords

Foreign Direct Investment, FDI, OLI paradigm, Governance Infrastructure, Economic Growth, Technology Spillover, Host Country, Political Drivers, Economic Drivers, Cultural Distance, Sustainable Development Goals, Determinants, Controllability, Bidirectional Causality, Market Characteristics.

Frequently Asked Questions

What is the core purpose of this research?

The research provides a comprehensive overview of the complex relationship between the drivers of FDI and its economic effects on host countries, filling a research gap that previously treated these elements separately.

What are the primary thematic areas covered?

The study covers political, economic, social, cultural, and geographical drivers, as well as direct and indirect economic effects like productivity spillovers and economic growth.

What is the primary research question?

The research focuses on identifying the determinants and economic effects of FDI, determining their controllability by host countries, and analyzing how economic growth serves as an interconnecting element between drivers and effects.

Which methodology was applied?

A systematic literature review was conducted using databases such as EBSCOhost and Google Scholar, filtering for high-quality, ranked publications to synthesize current knowledge through concept matrices.

What does the main body address?

The main body systematically analyzes FDI determinants in a hierarchy of controllability and evaluates the multifaceted economic impacts FDI can have on domestic firms and the overall host economy.

Which keywords characterize the work?

Key terms include Foreign Direct Investment, OLI paradigm, economic growth, technology spillover, host country determinants, and institutional infrastructure.

How does the OLI paradigm contribute to the findings?

The OLI paradigm serves as the guiding theory to structure the analysis of locational aspects and the attractiveness of FDI for multinational corporations.

Why is "governance infrastructure" considered a primary political driver?

It is classified as a top-tier driver because it encompasses the fundamental legal and regulatory frameworks that host countries can directly influence to protect property rights and reduce uncertainty for investors.

What is the significance of the "threshold level" concept?

The thesis concludes that FDI only contributes effectively to economic growth if the host country possesses certain threshold levels of human capital and income, which allow it to absorb technological spillovers from multinational corporations.

What does the bidirectional causality between FDI and economic growth imply?

It implies that while FDI can act as a driver for economic growth, a growing economy in the host country simultaneously acts as a powerful driver to attract further FDI, creating an interdependent cycle.