Foreign Capital Dependence and Development: A New Direction

By Jeffrey Kentor, T. Boswell. American Sociological Review, 2003

190 citations recorded by the source corpus.

Scholars have long debated the impact of foreign investment on the economies of less developed countries. Many argue that foreign investment is beneficial for the host economy; others argue, just as forcefully, that dependence on foreign capital is detrimental. This study offers a new conceptualization of foreign capital dependence that may resolve this debate: foreign investment concentration, which is the proportion of a host country's foreign direct investment stocks owned by the single largest investing country. The theory is that high investment concentration limits the autonomy of state and business elites to act in the long-term interests of domestic growth. In a series of cross-national panel regression models of 39 less developed countries estimated at five-year intervals from 1970 to 1995, the often cited negative effects of foreign capital penetration on growth in GNP per capita are dramatically reduced or entirely replaced when investment concentration, and the related concepts of export commodity and trade partner concentrations, are included in the analyses. Foreign investment concentration has a significant, long-term negative effect on growth that is strongest over the initial five-year period and decreases over the next 15 years. A similar effect is also found for the 1990–1997 period. This structural aspect of capital dependence has a greater impact on development than does the overall level of foreign capital penetration.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/1327a2de04f132e454846a0cf22df8506838ffa2

How researchers see this paper

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In Economics and Econometrics

1. Andrew K. Jorgenson
2. Brett Clark
3. T. J. Burns
4. Sylvia Szabo
5. Kyle W. Knight
6. James Rice
7. J. Schor
8. E. Rosa

In Finance

1. Sylvia Szabo
2. Andrew K. Jorgenson
3. T. J. Burns

Citations in the corpus

• Foreign Direct Investment and Economic Growth Literature Review from 1994 to 2012 (2014, unknown): “Kentor and Boswell (2003) 39 less developed countries 1970- 1995.”
• Urbanisation and Food Insecurity Risks: Assessing the Role of Human Development (2016, background): “Concerning the confounding factors, previous economic research reports the potential negative impact of FDI (Kentor & Boswell, 2003) and natural disasters (IFRCRCS, 2010) on food security.”
• The political-economic causes of change in the ecological footprints of nations, 1991-2001: A quantitative investigation (2007, background): “Consistent with other cross-national studies (e.g., Jorgenson, 2003, 2005, 2006a; Kentor, 1998; Kentor and Boswell, 2003), all variables that are logged [natural log] in the current analyses are done so to correct for excessive skewness (Fox, 1997; Meyers et al., 2006).”
• Are the Economy and the Environment Decoupling? A Comparative International Study, 1960–20051 (2012, background): “…and Parks 2007; Stretesky and Lynch 2009; Jorgenson 2012).25 And as in foreign direct investment, research links economic development in less developed countries to trade openness, and the latter generally includes growth in manufacturing exports (e.g., Gilpin 2001; Kentor and Boswell 2003).”