Skip to content
BY 4.0 license Open Access Published by De Gruyter Open Access July 13, 2015

Does Growth Attract FDI?

  • Sasi Iamsiraroj and Hristos Doucouliagos EMAIL logo
From the journal Economics

Abstract

FDI is seen widely as a vital source of investment, technology transfer, and growth. The factors that attract FDI have been a longstanding source of debate. The authors present a comprehensive assessment of the accumulated evidence on one factor, the success of economic growth in attracting FDI. Meta-regression analysis is applied to 946 estimates from 140 empirical studies. The results confirm that, on average, economic growth is an important determinant of FDI. Overall, there is a positive correlation between growth and FDI and this is much larger among single country case studies than with cross-country analysis.

JEL Classification: O24; F21

References

Agarwal, J. P. (1980). Determinants of foreign direct investment: A survey. Weltwirtschaftliches Archiv 116(4): 739–773. http://link.springer.com/article/10.1007/BF02696547.Search in Google Scholar

Agosin, M. R., and Machado, R. (2007). Openness and the international allocation of foreign direct investment. Journal of Development Studies 43(7): 1234–1247. http://www.tandfonline.com/doi/abs/10.1080/00220380701526410.Search in Google Scholar

Akinlo, A. E. (2004). Foreign direct investment and growth in Nigeria: An empirical investigation. Journal of Policy Modeling 26(5): 627–639. http://www.sciencedirect.com/science/article/pii/S0161893804000572.Search in Google Scholar

Al Nasser, O. M. (2010). How does foreign direct investment affect economic growth? The role of local conditions. Latin American Business Review 11(2): 111–139. http://www.tandfonline.com/doi/abs/10.1080/10978526.2010.486715.Search in Google Scholar

Albuquerque, R., Loayza, N., and Servén, L. (2005). World market integration through the lens of foreign direct investors. Journal of International Economics 66(2): 267–295. ideas.repec.org/a/eee/inecon/v66y2005i2p267-295.html.Search in Google Scholar

Asiedu, E. (2002). On the determinants of foreign direct investment to developing countries: Is Africa different? World Development 30(1): 107–119. ideas.repec.org/a/eee/wdevel/v30y2002i1p107-119.html.Search in Google Scholar

Barslund, M., Rand, J., Tarp, F., and Chiconela, J. (2007). Understanding victimization: The case of Mozambique. World Development 35(7): 1237–1258 http://www.sciencedirect.com/science/article/pii/S0305750X07000551.Search in Google Scholar

Blonigen, B. A., Davies, R. B., Waddell, G. R., and Naughton, H. T. (2007). FDI in space: Spatial autoregressive relationships in foreign direct investment. European Economic Review 51(5): 1303–1325. http://www.sciencedirect.com/science/article/pii/S0014292106001085.Search in Google Scholar

Buchanan, B. G., Le, Q. V., and Rishi, M. (2012). Foreign direct investment and institutional quality: Some empirical evidence. International Review of Financial Analysis 21(C): 81–89. http://econpapers.repec.org/article/eeefinana/v_3a21_3ay_3a2012_3ai_3ac_3ap_3a81-89.htm.Search in Google Scholar

Buckley, P. J., and Casson, M. (1976). The future of the multinational enterprise. London: Macmillan Press.10.1007/978-1-349-02899-3Search in Google Scholar

Card, D., and Krueger, A. B. (1995). Time-series minimum-wage studies: A meta-analysis. American Economic Review 85(2): 238–243. ideas.repec.org/a/aea/aecrev/v85y1995i2p238-43.htmlSearch in Google Scholar

Carstensen, K., and Toubal, F. (2004). Foreign direct investment in Central and Eastern European countries: A dynamic panel analysis. Journal of Comparative Economics 32(1): 3–22. http://www.sciencedirect.com/science/article/pii/S014759670300131810.1016/j.jce.2003.11.001Search in Google Scholar

Chakrabarti, A. (2001). The determinants of foreign direct investment: sensitivity analyses of cross-country regressions. Kyklos 54(1): 89–114. http://onlinelibrary.wiley.com/doi/10.1111/1467-6435.00142/abstract10.1111/1467-6435.00142Search in Google Scholar

Clark, D. P., Highfill, J., Campino, J. d. O., and Rehman, S. S. (2011). FDI, technology spillovers, growth, and income inequality: A selective survey. Global Economy Journal 11(2): 1–42. ideas.repec.org/a/bpj/glecon/v11y2011i2n1.html10.2202/1524-5861.1773Search in Google Scholar

Cohen, J. (1988). Statistical Power Analysis in the Behavioral Sciences (2nd ed.). Hillsdale: Erlbaum.Search in Google Scholar

de Mello, L. R. (1997) Foreign direct investment in developing countries and growth: A selective survey. Journal of Development Studies 34(1): 1–34. http://www.tandfonline.com/doi/abs/10.1080/00220389708422501#preview.10.1080/00220389708422501Search in Google Scholar

Doucouliagos, H. (2011). How large is large? Preliminary and relative guidelines for interpreting partial correlations in economics, Economics Series 2011//5, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. ideas.repec.org/p/dkn/econwp/eco_2011_5.html.Search in Google Scholar

Dunning, J. H. (1973). The determinants of international production. Oxford Economic Papers 25(3): 289–336. http://www.jstor.org/stable/2662317?seq=1#page_scan_tab_contents10.1093/oxfordjournals.oep.a041261Search in Google Scholar

Everitt, B. S., Landau, S., and Leese, M. (2001). Cluster Analysis (4th ed.). London: Arnold.Search in Google Scholar

Feld, L. P., and Heckemeyer, J. H. (2011). FDI and taxation: A meta study. Journal of Economic Surveys 25(2): 233–272. http://onlinelibrary.wiley.com/wol1/doi/10.1111/j.1467-6419.2010.00674.x/full10.1111/j.1467-6419.2010.00674.xSearch in Google Scholar

Filippaios, F., Papanastassiou, M., and Pearce, R. (2003). The evolution of US outward foreign direct investment in the pacific rim: A cross-time and country analysis. Applied Economics 35(16): 1779–1787. ideas.repec.org/a/taf/applec/v35y2003i16p1779-1787.html10.1080/0003684032000154220Search in Google Scholar

Gastanaga, V. M., Nugent, J. B., and Pashamova, B. (1998). Host country reforms and FDI inflows: How much difference do they make? World Development 26(7): 1299–1314. http://www.sciencedirect.com/science/article/pii/S0305750X98000497Search in Google Scholar

Greenaway, D., Sapsford, D., and Pfaffenzeller, S. (2007). Foreign direct investment, economic performance and trade liberalisation. World Economy 30(2): 197–210. http://onlinelibrary.wiley.com/doi/10.1111/j.1467-9701.2007.00887.x/abstract10.1111/j.1467-9701.2007.00887.xSearch in Google Scholar

Hausmann, R., and Fernández-Arias, E. (2000). Foreign direct investment: Good cholesterol?, Inter-American Development Bank working paper no. 417. New Orleans: Inter-American Development Bank. ideas.repec.org/p/idb/wpaper/4203.htmlSearch in Google Scholar

Havránek, T., and Iršová, Z. (2010). Meta-analysis of intra-industry FDI spillovers: Updated evidence. Journal of Economics and Finance 60(2): 151–174. http://journal.fsv.cuni.cz/mag/article/show/id/118410.2139/ssrn.1140707Search in Google Scholar

Havránek, T., and Iršová, Z. (2011). Estimating vertical spillovers from FDI: Why results vary and what the true effect is. Journal of International Economics 85(2), 234–244. http://www.sciencedirect.com/science/article/pii/S002219961100081X10.1016/j.jinteco.2011.07.004Search in Google Scholar

Havránek, T., and Iršová, Z. (2012). Survey article: Publication bias in the literature on foreign direct investment spillovers. Journal of Development Studies 48(10): 1375–1396. http://www.tandfonline.com/doi/abs/10.1080/00220388.2012.68572110.1080/00220388.2012.685721Search in Google Scholar

Havránek, T. (2015). Measuring intertemporal substitution: The importance of method choices and selective reporting. Journal of the European Economic Association, forthcoming. http://onlinelibrary.wiley.com/doi/10.1111/jeea.12133/abstract10.1111/jeea.12133Search in Google Scholar

Hox, J. J. (2002). Multilevel analysis: Techniques and applications. Mahwah, NJ: Lawrence Erlbaum.10.4324/9781410604118Search in Google Scholar

Hunter, J. E., and Schmidt, F. L. (2004). Methods of meta-analysis: Correcting error and bias in research findings. London: Sage.10.4135/9781412985031Search in Google Scholar

Hymer, S. H. (1976). The international operations of national firms: A study of direct foreign investment. Boston, MA.: MIT Press.Search in Google Scholar

Iršová, Z., and Havránek, T. (2013). Determinants of horizontal spillovers from FDI: Evidence from a large meta-analysis. World Development 42: 1–15. http://www.sciencedirect.com/science/article/pii/S0305750X1200190810.1016/j.worlddev.2012.07.001Search in Google Scholar

Jensen, N. M. (2003). Democratic governance and multinational corporations: Political regimes and inflows of foreign direct investment. International Organization 57(3): 587–616. http://www.jstor.org/stable/3594838?seq=1#page_scan_tab_contents10.1017/S0020818303573040Search in Google Scholar

Jiménez, A. (2011). Political risk as a determinant of Southern European FDI in neighboring developing countries. Emerging Markets Finance and Trade 47(4): 59-74. http://www.tandfonline.com/doi/abs/10.2753/REE1540-496X470404?journalCode=mree2010.2753/REE1540-496X470404Search in Google Scholar

Kandil, M. (2011). Financial flows to developing and advanced countries: Determinants and implications. International Journal of Development Issues 10(1): 60–91. http://www.emeraldinsight.com/doi/abs/10.1108/1446895111112333710.1108/14468951111123337Search in Google Scholar

Kindleberger, C. P. (1969). American business abroad: Six lectures on direct investment. New Heaven: Yale University Press.Search in Google Scholar

Li, X., and Liu, X. (2005). Foreign direct investment and economic growth: An increasingly endogenous relationship. World Development 33(3): 393–407. http://www.sciencedirect.com/science/article/pii/S0305750X0400201310.1016/j.worlddev.2004.11.001Search in Google Scholar

Lim, D. (1983). Fiscal incentives and direct foreign investment in less developed countries. Journal of Development Studies 19(2): 207–212. http://www.tandfonline.com/doi/abs/10.1080/0022038830842185910.1080/00220388308421859Search in Google Scholar

Lucas, R. E. (1993). On the determinants of direct foreign investment: Evidence from East and Southeast Asia. World Development 21(3): 391–406. http://www.sciencedirect.com/science/article/pii/0305750X9390152Y10.1016/0305-750X(93)90152-YSearch in Google Scholar

Meyer, K. E., and Sinani, E. (2009). When and where does foreign direct investment generate positive spillovers? A meta-analysis. Journal of International Business Studies 40(7): 1075–1094. http://www.palgrave-journals.com/jibs/journal/v40/n7/abs/jibs2008111a.html10.1057/jibs.2008.111Search in Google Scholar

Most, S. J., and Vann De Berg, H. (1996). Growth in Africa: Does the source of investment financing matter? Applied Economics 28(11): 1427–1433. http://www.tandfonline.com/doi/abs/10.1080/000368496327697Search in Google Scholar

Noorbakhsh, F., Paloni, A., and Youssef, A. (2001). Human capital and FDI inflows to developing countries: New empirical evidence. World Development 29(9): 1593–1610. http://www.sciencedirect.com/science/article/pii/S0305750X0100054710.1016/S0305-750X(01)00054-7Search in Google Scholar

Reece, C., and Sam, A. G. (2012). Impact of pension privatization on foreign direct investment. World Development 40(2): 291–302. http://www.sciencedirect.com/science/article/pii/S0305750X1100156210.1016/j.worlddev.2011.06.003Search in Google Scholar

Roberts, C. J., and Stanley, T. D. (2005). Meta-regression analysis: Issues of publication bias in economics. Oxford: Blackwell.Search in Google Scholar

Schneider, F., and Frey, B. S. (1985). Economic and political determinants of foreign direct investment. World Development 13(2): 161–175. http://www.sciencedirect.com/science/article/pii/0305750X8590002610.1016/0305-750X(85)90002-6Search in Google Scholar

Stanley, T. D. (2001). Wheat from chaff: Meta-analysis as quantitative literature review. Journal of Economic Perspectives 15(3): 131–150. https://www.aeaweb.org/articles.php?doi=10.1257/jep.15.3.13110.1257/jep.15.3.131Search in Google Scholar

Stanley, T. D. (2005). Beyond publication bias. Journal of Economic Surveys 19(3): 309–345. http://onlinelibrary.wiley.com/doi/10.1111/j.0950-0804.2005.00250.x/abstract10.1111/j.0950-0804.2005.00250.xSearch in Google Scholar

Stanley, T. D. (2008). Meta-regression methods for detecting and estimating empirical effects in the presence of publication selection. Oxford Bulletin of Economics and Statistics 70(1): 103–127. http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0084.2007.00487.x/abstractSearch in Google Scholar

Stanley, T. D., and Doucouliagos, H. (2010). Picture this: A simple graph that reveals much ado about research. Journal of Economic Surveys 24(1): 170–191. http://onlinelibrary.wiley.com/doi/10.1111/j.1467-6419.2009.00593.x/full10.1111/j.1467-6419.2009.00593.xSearch in Google Scholar

Stanley, T. D., and Doucouliagos, H. (2012). Meta-regression analysis in economics and business. New York: Routledge.10.4324/9780203111710Search in Google Scholar

Stanley, T. D., and Doucouliagos, H. (2014). Meta-regression approximations to reduce publication selection bias. Research Synthesis Methods 5(1): 60–78. http://onlinelibrary.wiley.com/doi/10.1002/jrsm.1095/abstract10.1002/jrsm.1095Search in Google Scholar

Stanley, T. D., Doucouliagos, H., Giles, M., Heckemeyer, J. H., Johnston, R. J., Laroche, P., et al. (2013). Meta-analysis of economics research reporting guidelines. Journal of Economic Surveys 27(2): 390–394. http://onlinelibrary.wiley.com/doi/10.1111/joes.12008/abstract10.1111/joes.12008Search in Google Scholar

Stanley, T. D., and Jarrell, S. B. (1989). Meta-regression analysis: A quantitative method of literature surveys. Journal of Economic Surveys 3(2): 161–170. http://onlinelibrary.wiley.com/doi/10.1111/j.0950-0804.2005.00249.x/abstract10.1111/j.1467-6419.1989.tb00064.xSearch in Google Scholar

UNCTAD. (2012). World Investment Report 2012: Towards a new generation of investment policies. Geneva: United Nations.Search in Google Scholar

Vernon, R. (1966). International investment and international trade in the product cycle. Quarterly Journal of Economics 80(2): 190–207. http://www.jstor.org/stable/1880689?seq=1#page_scan_tab_contentsSearch in Google Scholar

Wang, Z. Q., and Swain, N. J. (1995). The determinants of foreign direct investment in transforming economies: Empirical evidence from Hungary and China. Weltwirtschaftliches Archiv 131(2): 359–382. http://link.springer.com/article/10.1007%2FBF0270744010.1007/BF02707440Search in Google Scholar

Wei, S.-J. (2000). How taxing is corruption on international investors? Review of Economics and Statistics 82(1): 1–11. http://www.mitpressjournals.org/doi/abs/10.1162/003465300558533#.VZRRAEb55skSearch in Google Scholar

Wheeler, D., and Mody, A. (1992). International investment location decisions: The case of U.S. firms. Journal of International Economics 33(1): 57–76. http://www.sciencedirect.com/science/article/pii/002219969290050TSearch in Google Scholar

Wint, A. G., and Williams, D. A. (2002). Attracting FDI to developing countries: A changing role for government? International Journal of Public Sector Management 15(5): 361–374. http://www.emeraldinsight.com/doi/abs/10.1108/09513550210435719Search in Google Scholar

Wooster, R. B., and Diebel, D. S. (2010). Productivity spillovers from foreign direct investment in developing countries: A meta-regression analysis. Review of Development Economics 14(3): 640–655. ideas.repec.org/a/bla/rdevec/v14y2010is1p640-655.html10.1111/j.1467-9361.2010.00579.xSearch in Google Scholar

Zhang, K. H. (2001a). Does foreign direct investment promote economic growth? Evidence from East Asia and Latin America. Contemporary Economic Policy 19(2): 175–185. http://onlinelibrary.wiley.com/doi/10.1111/j.1465-7287.2001.tb00059.x/abstract10.1111/j.1465-7287.2001.tb00059.xSearch in Google Scholar

Zhang, K. H. (2001b). What explains the boom of foreign direct investment in China? International Economics 54(2): 251–274. ideas.repec.org/a/ris/ecoint/0221.htmlSearch in Google Scholar

Received: 2015-02-23
Revised: 2015-07-01
Accepted: 2015-07-03
Published Online: 2015-07-13
Published in Print: 2015-12-01

© 2015 Sasi Iamsiraroj et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Downloaded on 19.4.2024 from https://www.degruyter.com/document/doi/10.5018/economics-ejournal.ja.2015-19/html
Scroll to top button