Abstract
The economic basis of globalisation lies in multilateralism where the intended impact is allocative efficiency. So, it can be said about foreign direct investment (FDI) that multilateralism implies importing capital from a variety of sources as may be most efficient rather than restricting them to a bilateral basis. This forms the motivation of this paper. This paper has used principal component analysis (PCA) and panel regression approaches. The study builds up a methodology for measuring and testing the determinants of the patterns of global inward FDI. These determinants are a large set of developmental variables. The study evolves a set of six composite indices by using of PCA, namely human resource, infrastructure, labour, market, trade openness and resource. The results establish certain basic principles of FDI theory in terms of efficiency-seeking FDI, resource-seeking FDI and market-seeking FDI.
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