Foreign Direct Investment

Foreign direct investment (FDI) refers to an investment made to acquire a lasting interest in or effective control of an enterprise operating outside the investor’s economy. During the 1990s, FDI flows dramatically increased as financial markets globalized. Prior to 2012, developed economies received more FDI flows than developing countries. In addition, only a few developing economies received more than half of the overall FDI inflows to developing economies.

Whether FDI is crucial for economic development still generates controversy among economists. On the one hand, FDI allows developing countries to have access to more capital, sophisticated technologies, new business practices, and connections to international production networks. On the other hand, the critics of FDI warn that in order to get the full benefit from FDI, the strategy ...