Global Inward Foreign Direct Investment: Trends and Concentration Patterns

Abstract

With globalisation, there has been a phenomenal rise in Foreign Direct Investment (FDI). This has led to an international relocation of production and consequent generation of income and employment. This, in turn, has led to international specialisation of production and is likely to maximize global welfare. This could happen only if the concentration of FDI is low or FDI is well distributed. We use a set of new indices and Herfindahl index of concentration to examine concentration of inward FDI in terms of flow and stock during 1990-2009. The results clearly indicate that there is a low concentration in distribution of FDI in terms of inflow and stock. The low concentration ratio implies that the share of developing countries is increasing. It implies that the distribution of FDI has been moving towards uniform distribution of productive resources across countries, which is the basic purpose of globalisation and competition.