Most Common Potential Determinants of FDI: Review of Literature

Abstract

The aim of this paper is to provide the critical analysis of the potential determinants of FDI. Review of the literature led to the development of research model which provides the most potential determinants of FDI. The importance of FDI is considered to be important for both developed and developing countries. In this regard, the potential determinants of FDI which have been identified as a result of literature review include market size, labour cost and productivity, political risk, infrastructure, economic growth and tax. Nearly all of these variables are reported to have an indecisive relationship with FDI, that is to say, some papers show a positive correlation between variables while other present negative or no relationship at all.