Abstract
According to eclectic theory of Dunning, FDI could be of four types: market seeking, resource seeking,efficiency seeking and strategic asset seeking. Market seeking factors of FDI such as market size, market growth,structure of domestic market, etc. aim at penetrating the local markets of host countries. While resource seekinginvestments are made in order to have access to cheap raw material, pool of labor, infrastructure, etc. Newsources of competitiveness, economies of scope and specialization and low cost of production are some of theefficiency seeking factors of FDI. An attempt is made to study the impact of market seeking, efficiency seekingand resource seeking factors of host countries on FDI inflows of host countries by taking sample 10 Asiancountries in the time period 1991 to 2008. Panel regression results show that all categories of FDI motivatingfactors have a significant impact on FDI inflows.
Highlights
The eclectic framework of Dunning (1980) is used as a basic framework in this paper which seeks to examine the impact of market seeking, resource seeking and efficiency seeking factors of host on FDI inflows of host countries
All the factors are hypothesized : 2.1 Market seeking factors In this category, we have used three variables, which are gross domestic product (GDP) of host country, population growth of host country and exports of host country which are the proxies for economic growth and market size
All this lead to our first hypothesis which is as follows: H1a: There is a positive relationship between the GDP of host country and FDI inflows to host country. 2.1.2 Population Growth Population is one of the market seeking factors of FDI as it is considered as proxy for size of the country or size of the market
Summary
The eclectic framework of Dunning (1980) is used as a basic framework in this paper which seeks to examine the impact of market seeking, resource seeking and efficiency seeking factors of host on FDI inflows of host countries. If investing country requires some kind of inputs or factors which are not available in host country and are imported more production will lead to increase of imports of inputs In this case, the relationship between imports and FDI will be positive (Alguacil and Orts, 2002). The relationship between imports and FDI will be positive (Alguacil and Orts, 2002) This leads to the following hypothesis: H3a: There is positive/negative relationship between imports of host country and FDI inflow of host country. We have used roads paved among our infrastructure proxies and the following hypothesis is framed: H3d: There is a positive relationship between roads paved of host country and FDI inflows of host country
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