Analyses of FDI determinants in developing countries

Abstract

Purpose – The purpose of this paper is to investigate the best determinants of foreign direct investment (FDI) in developing countries.Design/methodology/approach – This paper investigates whether FDI determinants affect FDI based on both a panel of data (FMOLS‐fully modified OLS) and cross‐section SUR (seemingly unrelated regression) for 24 developing countries, over the period 1983‐2005 for FMOLS and 1976‐2005 for cross‐section SUR.Findings – The interaction of FDI with some FDI determinants have a strong positive effect on economic progress in developing countries, while the interaction of FDI with the total debt service/GDP and inflation have a negative impact. The most important determinant of FDI is the communication variable.Research limitations/implications – The limitations of the study are based on the development of data set which could be found uninterrupted for 30 years in 24 developing countries.Originality/value – The main objective of this study is to define the main FDI determinants that ...