Abstract
During the last decades, the relation between FDI and economic growth has been extensively discussed in the economic literature. Theories and existing literature provide conflicting results concerning this relationship. On one hand, some scholars argue that foreign direct investment could stimulate technological change through the adoption of foreign technology and know-how and technological spillovers, thus boosting host country economies. On the other hand, other pessimists believe that FDI may bring about crowding out effect on domestic investment, external vulnerability and dependence, destructive competition of foreign affiliates with domestic firms and “market-stealing effect” as a result of poor absorptive capacity. This paper sums up the literature as well as empirical studies on the relationship between foreign direct investment and economic growth, trying to arrive at a meaning revelation eventually.
Highlights
During the last decades, the relation between foreign direct investment (FDI) and economic growth has been extensively discussed in the economic literature
FDI can be divided into two forms: “greenfield” investment, which is called “mortar and brick” investment, as well as merger and acquisition (M&A), which entails the acquisition of existing interest rather than new investment
An important aspect of globalization during the last few years has been the impressive surge of FDI by multinational corporations, which has become the primary source of external financing for countries all over the world
Summary
The relation between FDI and economic growth has been extensively discussed in the economic literature. Findlay (1978) has postulated that FDI, through a “contagion” effect, increased the rate of technical progress in host country from the more advanced technology, management practices, etc., used by foreign firms.
Sign-in/Register to view highlights & summary 
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call