Determinants of, and the Relation between, Foreign Direct Investment and Growth A Summary of the Recent Literature

By Ewe-Ghee Lim. Social Science Research Network, 2001

541 citations recorded by the source corpus.

This paper summarizes recent arguments/findings on two aspects of foreign direct investment (FDI): its correlation with economic growth and its determinants. The first part focuses on recent literature regarding positive spillovers from FDI while the second deals with the determinants of FDI. The paper finds that while substantial support exists for positive spillovers from FDI, there is no consensus on causality. On determinants, the paper finds that market size, infrastructure quality, political/economic stability, and free trade zones are important for FDI, while results are mixed regarding the importance of fiscal incentives, the business/investment climate, labor costs, and openness.

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/49002097897dc786601b2b8cf157620dcf9dca8c

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Citations in the corpus

Why is there a lack of evidence on knowledge spillovers from foreign direct investment (2018, unknown): “…at technology frontier, while restrictive investment climate tend to attract FDI that is likely to be less efficient and exhibit older technology, as well as experiences slower rates of new technology transfer and lags in the utilization of advanced management systems (Moran, 1998; Lim, 2001: 4-9).”
Foreign direct investment, growth and income inequality in less developed countries (2005, background): “(See Lim (2001) for a survey of other papers examining links between FDI and economic growth.)”
Foreign Direct Investment and Regional Trade Agreements: The Market Size Effect Revisited (2004, unknown): “10 This section is based on the literature review of Lim (2001).”
The Cyclical Nature of North-South FDI Flows (2003, background): “Inter-American Development Bank Banco Interamericano de Desarrollo (BID) Research department Departamento de investigación Working Paper #479”
The Effects Of Foreign Direct Investment On The Host Country'S Economic Growth: Theory And Empirical Evidence (2013, background): “Lim (2001) and Ford et al. (2008) argue that economic growth 13 derived from FDI is more noticeable on countries with high skills.”
The Impact of FDI on Economic Growth: Some Evidence from Southeast Europe (2013, background): “Past empirical research on the relationship between FDI and economic growth is quite rich (for a literature review, see Lim 2001).”
Institutions and the External Capital Structure of Countries (2004, unknown): “14 Lim (2001) reviews the literature on the determinants of FDI.”
Determinants of Foreign Direct Investment and Its Impact on Economic Growth in Developing Countries (2007, background): “The mixed result might stems from the problems of getting reliable proxies for the qualitative phenomena, such as political instability (Korbin, 1981; Lim, 2001).”
Putting the Cart Before the Horse? Capital Account Liberalization and Exchange Rate Flexibility in China (2005, unknown): “The most important factors affecting FDI include market size, GDP growth, productivity growth, political and macroeconomic stability, the regulatory environment, and the ability to repatriate profits (Lim, 2001).”