Foreign direct investment and development: Insights from literature and ideas for research
November 26, 2015 Editor 0
For many decades, academia and policy making has debated about the role of Foreign Direct Investment (FDI) in development. Such question has been very difficult to elucidate, not only because the discussion has being colored by many ideological dogmas, but also because the very fundamental characteristics of cross border investment have evolved over time. Indeed, over the last five decades, the paradigm of FDI has changed significantly. Traditionally FDI has been visualized as a flow of capital, flowing from “North” to “South” by big multinational enterprises (MNEs) from industrial countries investing in developing countries, traditionally aiming to exploit natural resources in the latter or to substitute trade as a means to serve domestic consumption markets. Such paradigm has changed significantly.
Today, FDI is not only about capital, but also –and more important– about technology and know-how, it no longer flows from “North” to “South”, but also from “South” to “South” and from “South” to “North”. Further, FDI is no longer a substitute of trade, but quite the opposite. Today FDI has become part of the process of international production, by which investors locate in one country to produce a good or a service that is part of a broader global value chain (GVC). Investors then, have become traders and vice-versa. Moreover, FDI is now not only carried out by only big MNEs, but also from relatively smaller firms from developing countries that are investing in countries beyond their home countries. Last but not least, cross-border investment is no longer only about portfolio investment and FDI. International patterns of production are leading to new forms of cross-border investment, in which foreign investors share their intangible assets such as know-how or brands in conjunction with local capital or tangible assets of domestic investors. This is the case of non-equity modes of investment (NEMs) –such as franchises, outsourcing, management contracts, contract farming or manufacturing.
- Building for Development: Could Infrastructure Draw Unexpected Investors to Africa?
- Cloud Computing for Development: A Four-Stage Analysis of Public, Private, and Hybrid Solutions
- What About Facebook Messenger Chatbots for Development?
- Delivering Solutions for Growth: Promoting Competitiveness and Innovation through Activist Strategies
- University for Women Key to African Agriculture
- Technological Leapfrogging in Agriculture
Categories: World Bank PSD
Subscribe to our stories
- SL Crowd Green Solutions September 21, 2020
- Digital transformation in the banking sector: surveys exploration and analytics August 3, 2020
- Why Let Others Disrupt You? Take the Smart Self-Disruption Journey! August 3, 2020
- 5 Tips for Crowdfunding During the Pandemic August 3, 2020
- innovation + africa; +639 new citations August 3, 2020