Advances in Management and Applied Economics

FDI and Growth

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  •                                                      Abstract

     

    Multinational corporations [MNCs] usually engage in foreign direct investment [FDI] to take cost advantages of producing abroad to negate the need for licensing or subsidiary production. At the macro level, FDI accounts for significant proportions of MNCs total investment and has discernible impacts on economic growth. This is shown theoretically in the growth model where FDI complements domestic capital. Our model predictions tested favourably against panel data analysis of FDI on growth for thirty OECD countries. This paper also contributes in relating micro and macro aspects of the impact of FDI on economic growth and provides empirical support to the existing literature.