An empirical criticism of the "FDI development" convention

Abstract

Pro-Foreign Domestic Investment (FDI) policies have become a pillar of the development convention. While the literature has provided numerous studies on the effects of FDI on growth and investment in host country, very little is known about how domestic investment itself affects FDI inflows. The paper is an attempt to fill this gap. Evidences from a large cross-country sample (68 countries), over a long period , show that lagged domestic investment has a strong influence on FDI inflows in the host economy, implying that domestic investment is a strong catalyst for FDI in developing countries and that multinational companies do follow economic development.

The Evolutionary Dimensions of Global Investment Networks

“…Institutional quality relates to risk assessment, which is also a key determinant of FDI (Lautier & Moreau, 2012). The quality of institutions matters because the institutional quality of a country in terms of its legal and political frameworks are vital for multinationals.…”

Reviewing Trade Openness, Domestic Investment, and Economic Growth Nexus: Contemporary Policy Implications for the MENA region

“…LnGFCF is the proxy for domestic investment as measured by the amount of total gross fixed capital formation for country i at time t as is usual in similar empirical studies (Bal et al, 2016;Onifade et al, 2020a). Lautier & Moreau (2012) have noted that the use of the gross capital formation variable would not only help to account for the level of domestic investment alone, but it would also partly contribute to account for the influence of the inflow of foreign direct investment.…”

“…However, the expected impact of trade on the economic performance may not be accurately assessed if other crucial factors, such as the prevailing level of investments in the domestic economy of the trading countries, are not accounted for. Firstly, domestic investment rates are expected to influence the productivity of local firms, which in turn is expected to have crucial impacts on the overall economic performance or the GDP size (Ndikumana & Verick, 2008;Lautier & Moreau, 2012). Secondly, domestic investment also tends to influence other growth stimulants like the inflow of foreign direct investment, as has been established in the literature (Lautier & Moreau, 2012;Hicham et al, 2017;Onifade et al, 2020a;Bakari & Sofien, 2019).…”

“…Firstly, domestic investment rates are expected to influence the productivity of local firms, which in turn is expected to have crucial impacts on the overall economic performance or the GDP size (Ndikumana & Verick, 2008;Lautier & Moreau, 2012). Secondly, domestic investment also tends to influence other growth stimulants like the inflow of foreign direct investment, as has been established in the literature (Lautier & Moreau, 2012;Hicham et al, 2017;Onifade et al, 2020a;Bakari & Sofien, 2019). Currently, to the best of our knowledge, no study has incorporated the salient issue of domestic investment in the trade-led growth hypothesis in the case of the MENA region.…”

Democracia, governança, liberdade econômica e investimento estrangeiro direto

“…Concluiu-se que há muitos fatores que interferem na escolha do país para a remessa de capital com o objetivo de investimento a longo prazo. Esses fatores são, por exemplo, estabilidade política, taxas, qualificação da mão de obra, abertura econômica, regulação estatal (Lautier & Moreau, 2012) e outros fatores elencados no decorrer do artigo. Cada um deles pode ter influência maior ou menor dependendo do investidor, do setor e dos objetivos (Lim, 2001).…”