Business Excellence, Vol. 13 No. 2, 2019.
Review article
https://doi.org/10.22598/pi-be/2019.13.2.179
FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH: TAKING STOCK OF THE CURRENT STATE OF EMPIRICAL RESEARCH
Darko Horvatin
orcid.org/0000-0002-1615-2522
; Croatian Pension Investment Company, Zagreb, Croatia
Abstract
Taking into account theory of foreign direct investment (FDI) with neoclassical
and endogenous theories of economic growth, FDI has been identified as a factor which
directly (capital accumulation) and indirectly (technology transfer) positively influences
economic growth. However, empirical findings regarding this matter are quite diverse.
Hence, the purpose of the paper is to take a critical view of the current state of empirical
research regarding the impact of FDI on the recipient country's economic growth. In
doing so, this research will inevitably take a view of the total global FDI inflows from
1970 until present time. The general finding is that there exists no unanimous conclusion
as to the impact of capital inflow on the host country’s economic growth due to a variety
of reasons sometimes not properly treated within the empirical analytical models. More
specifically, this impact varies from being very positive to neutral, at best, or even
negative. The reasons for such ambiguous findings arise from analytical weaknesses (the
way in which analytical samples are created) and the lack of better understanding of
theoretical and empirical aspects of the contribution of foreign capital to the host
country's economic growth (no differentiation between short- and long-term effects).
Keywords
FDI; economic growth; greenfield investment; mergers and acquisition.
Hrčak ID:
230051
URI
Publication date:
12.12.2019.
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