The Role of Foreign Direct Investment in the Rise of Emerging Economies
Author(s)
Download Full PDF Pages: 01-11 | Views: 327 | Downloads: 78 | DOI: 10.5281/zenodo.6912226
Abstract
Rising foreign direct investments (FDI) is considered as strong evidence of globalization. FDI plays a very important role in all countries, especially for developing economies, which are considered to be the engine of economic growth and development. The present paper analyses the role of FDI on emerging economies based on reviewing previous research in this domain. The first part of the article presents the characteristics of developed, developing and emerging economies and a characterization of FDI in terms of determinants and benefits. The second part includes a review on previous theories regarding the impact of FDI on economic growth, evaluating the impact of FDI on economic growth in emerging economies and the relationship between FDI and wage level. The main findings show that FDI plays a particularly important role in all the quantitative factors of economic growth and the contribution to economic growth is amplified by the positive interaction with human capital and sound macroeconomic policies and institutional stability. Most studies indicate a beneficial impact of FDI on the growth of host countries and the positive effects of FDI on salaries and job creation. However, some researchers claim that foreign investors tend to discourages wage growth in local firms.
Keywords
Foreign direct investment, FDI, emerging countries, developed countries, developing countries, economic growth.
References
i. Agrawal, G., & Khan, M. A. (2011). Impact of FDI on GDP: A comparative study of China and India. International Journal of Business and Management, 6(10), 71.
ii. Baiashvili, T., & Gattini, L. (2020). Impact of FDI on economic growth: The role of country income levels and institutional strength (No. 2020/02). EIB working papers.
iii. Bedi, A. S., & Cielik, A. (2002). Wages and wage growth in Poland: The role of foreign direct investment. Economics of Transition, 10(1), 1-27.
iv. Bengoa, M., & Sanchez-Robles, B. (2003). Foreign direct investment, economic freedom and growth: new evidence from Latin America. European journal of political economy, 19(3), 529-545.
v. Berthélemy, J. C., & Demurger, S. (2000). Foreign direct investment and economic growth: theory and application to China. Review of development economics, 4(2), 140-155.
vi. Bouoiyour, J., Selmi, R., & Miftah, A. (2016). What mitigates economic growth volatility in Morocco?: Remittances or FDI. Journal of Economic Integration, 65-102.
vii. Carkovic, M., & Levine, R. (2002). Does foreign investment accelerate economic growth. University of Minn-esota Working Paper.
viii. Chakrabarti, A. (2003). A theory of the spatial distribution of foreign direct investment. International Review of Economics & Finance, 12(2), 149-169.
ix. Charaia, V., Chochia, A., & Lashkhi, M. (2020). The impact of fdi on Economic development: The Case of Georgia. TalTech Journal of European Studies, 10(2), 96-116.
x. Chen, Z., Ge, Y., & Lai, H. (2011). Foreign direct investment and wage inequality: Evidence from China. World Development, 39(8), 1322-1332.
xi. Ciani, A., & Imbruno, M. (2017). Microeconomic mechanisms behind export spillovers from FDI: evidence from Bulgaria. Review of World Economics, 153(4), 703-734.
xii. Dima, A. (2021). The Importance of Innovation in Entrepreneurship for Economic Growth and Development. A Bibliometric Analysis. Review of International Comparative Management, 22(1), 120-131.
xiii. Dima, A. (2018). Where is Production Industry heading In the Context of Globalization 2.0. In Proceedings of the 31st International Business Information Management Association Conference (IBIMA), 1262-1273.
xiv. Driffield, N., & Jones, C. (2013). Impact of FDI, ODA and migrant remittances on economic growth in developing countries: A systems approach. The European Journal of Development Research, 25(2), 173-196.
xv. Fadhil, M. A., & Almsafir, M. K. (2015). The role of FDI inflows in economic growth in Malaysia (time series: 1975-2010). Procedia economics and finance, 23, 1558-1566.
xvi. Frolova, E. E., Zankovsky, S. S., Dudin, M. N., Zinkovsky, S. B., & Kirsanov, A. N. (2018). Studying concepts of the breakthrough economic reforms in selected developed and developing countries and regions of the world: Economic and legal aspects. J. Advanced Res. L. & Econ., 9, 1236.
xvii. Geleilate, J. M. G., Magnusson, P., Parente, R. C., & Alvarado-Vargas, M. J. (2016). Home country institutional effects on the multinationality–performance relationship: A comparison between emerging and developed market multinationals. Journal of International Management, 22(4), 380-402.
xviii. Girneata, A. (2015). The Evolution of the Textile and Clothing Industry–Romania: From Lohn to Loss. Revista Economica, 67(4), 176-187.
xix. Herzer, D., & Klasen, S. (2008). In search of FDI-led growth in developing countries: The way forward. Economic Modelling, 25(5), 793-810.
xx. Hirst, P., Thompson, G., & Bromley, S. (2015). Globalization in question. John Wiley & Sons.
xxi. Jackson, W. A. (2013). The desocialising of economic theory. International Journal of Social Economics.
xxii. Johnson, H. G. (2021). Economic policies towards less developed countries (Vol. 1). Routledge.
xxiii. Kuznets, S. (2019). Economic growth and income inequality. In The gap between rich and poor (pp. 25-37). Routledge.
xxiv. Li, X., & Liu, X. (2005). Foreign direct investment and economic growth: an increasingly endogenous relationship. World development, 33(3), 393-407.
xxv. Liu, W., Liu, R. H., Chen, H., & Mboga, J. (2020). Perspectives on disruptive technology and innovation: Exploring conflicts, characteristics in emerging economies. International Journal of Conflict Management.
xxvi. Loayza, N., Schmidt-Hebbel, K., & Servén, L. (2000). Saving in developing countries: an overview. The World Bank Economic Review, 14(3), 393-414.
xxvii. Makino, S., Lau, C. M., & Yeh, R. S. (2002). Asset-exploitation versus asset-seeking: Implications for location choice of foreign direct investment from newly industrialized economies. Journal of international business studies, 33(3), 403-421.
xxviii. Makki, S. S., & Somwaru, A. (2004). Impact of foreign direct investment and trade on economic growth: Evidence from developing countries. American journal of agricultural economics, 86(3), 795-801.
xxix. Mukhtorovna, N. D. (2021). Importance of foreign investments in the development of the digital economy. ResearchJet Journal of Analysis and Inventions, 2(04), 219-224.
xxx. Muñoz-Bullón, F., & Sánchez-Bueno, M. J. (2013). Multinational enterprises and domestic wages: The contingent effect of skill composition. International Business Review, 22(6), 918-931.
xxxi. Narula, R., & Dunning, J. H. (2010). Multinational enterprises, development and globalization: Some clarifications and a research agenda. Oxford Development Studies, 38(3), 263-287.
xxxii. Nistor, P. (2015). FDI implications on BRICS economy growth. Procedia Economics and Finance, 32, 981-985.
xxxiii. Nițescu, D. C., Murgu, V., & Căpriță, E. D. (2019). Impact of labor, FDI and R&D on business sustainability. Amfiteatru. Economic, 21, 795-815.
xxxiv. Noria, G. L. (2015). The effect of trade and FDI on inter-industry wage differentials: The case of Mexico. The North American Journal of Economics and Finance, 34, 381-397.
xxxv. Osadchy, E. A., Akhmetshin, E. M., Amirova, E. F., Bochkareva, T. N., Gazizyanova, Y., & Yumashev, A. V. (2018). Financial statements of a company as an information base for decision-making in a transforming economy.
xxxvi. Pegkas, P. (2015). The impact of FDI on economic growth in Eurozone countries. The Journal of Economic Asymmetries, 12(2), 124-132.
xxxvii. Pelinescu, E., & Radulescu, M. (2009). The impact of foreign direct investment on the economic growth and countries’ export potential. Romanian Journal of Economic Forecasting, 4(1), 153-169.
xxxviii. Rauch, E., Dallasega, P., & Matt, D. T. (2016). Sustainable production in emerging markets through Distributed Manufacturing Systems (DMS). Journal of Cleaner Production, 135, 127-138.
xxxix. Saglam, B. B., & Sayek, S. (2011). MNEs and wages: the role of productivity spillovers and imperfect labor markets. Economic Modelling, 28(6), 2736-2742.
xl. Savoiu, G., Dinu, V. & Ciuca, S. (2013). Foreign Direct Investment based on Country Risk and other Macroconomic Factors. Econometric Models for Romanian Economy. Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 39-61, March.
xli. Sarbu, M. R. (2015). Globalization and foreign direct investments. CES Working Papers, 7(2), 324-331.
xlii. Schneider, B. R., & Maxfield, S. (2018). Performance in Developing Countries. Business and the state in developing countries, 3.
xliii. Simionescu, M. (2018). Effects of European economic integration on foreign direct investment: The case of Romania. Economics and Sociology, 11(4), 96-105.
xliv. Szeles, M. R., & Saman, C. (2020). Globalisation economic growth and covid-19. Insights from international finance. Romanian Journal Of Economic Forecasting, 23(3), 78.
xlv. te Velde, D. W., & Morrissey, O. (2002). Foreign direct investment: Who gains. ODI Briefing Paper, 2020-01.
xlvi. Tomohara, A., & Takii, S. (2011). Does globalization benefit developing countries? Effects of FDI on local wages. Journal of Policy Modeling, 33(3), 511-521.
xlvii. Trifu, A. E., Girneata, A., & Potcovaru, M. (2014). Influence of natural factors upon the organization activities. Revista de Management Comparat International, 15(4), 487.
xlviii. Trifu, A. E., Gîrneață, A., & Potcovaru, A. M. (2015). The Impact of Regulations upon the Startup of New Businesses. Economia: Seria Management, 18, 49-59.
xlix. Vijaya, R. M., & Kaltani, L. (2007). Foreign direct investment and wages: a bargaining power approach. Journal of World-Systems Research, 83-95.
l. Wacker, K. M. (2016). (When) should we use foreign direct investment data to measure the activities of multinational corporations? Theory and evidence. Review of International Economics, 24(5), 980-999.
li. Wang, M. (2009). Manufacturing FDI and economic growth: evidence from Asian economies. Applied Economics, 41(8), 991-1002.
lii. Wang, X., Xu, Z., Qin, Y., & Skare, M. (2021). Foreign direct investment and economic growth: a dynamic study of measurement approaches and results. Economic research-Ekonomska istraživanja, 1-24.
liii. Wright, M., Filatotchev, I., Hoskisson, R. E., & Peng, M. W. (2005). Strategy research in emerging economies: Challenging the conventional wisdom. Journal of management studies, 42(1), 1-33.
liv. Yao, S. (2006). On economic growth, FDI and exports in China. Applied Economics, 38(3), 339-351.
Cite this Article: