Foreign Direct Investment and Development
Foreign Direct Investment and Development
This chapter focuses on the growth of foreign direct investment (FDI) in the developing world and the potential impact of FDI on the development process. It evaluates the developmental impact of FDI, and introduces two basic frameworks to analyze the interaction between MNEs and developing economies, the first of which relates country and firm factors, bringing together CSAs and FSAs. This framework is used to study the interaction between governments and the FSAs of the firm. FSAs are the proprietary capabilities owned by MNEs, and MNEs must protect them from dissipation. The second framework is called the social triangle, and introduces society on an equal footing with governments and firms. The chapter also presents a review of the literature on spillovers and linkages, and provides some basic data dealing with the interaction between FDI, trade, and economic development.
Keywords: framework, proprietary capabilities, social triangle, economic development, investment
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