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Determinants of Foreign Direct Investment in Developing Countries

Author

Listed:
  • Khondoker Abdul Mottaleb

    (Khondoker Abdul Mottaleb, Post-doctoral Research Fellow, National Graduate Institute for Policy Studies, Roppongi 7-22-1, Minato-ku, Tokyo, Japan; e-mail: mottaleb@grips.ac.jp)

  • Kaliappa Kalirajan

    (Kaliappa Kalirajan, Professor, Crawford School of Economics and Government, Crawford Building, The Australian National University, Canberra ACT 0200; e-mail: kaliappa.kalirajan@anu.edu.au)

Abstract

By bridging the gap between domestic savings and investment and bringing the latest technology and management know-how from developed countries, foreign direct investment (FDI) can play an important role in achieving rapid economic growth in developing countries. Developing countries have not been considered as favourable destinations for FDI as developed countries. Moreover, among the developing countries a few, such as China, India, Nigeria and Sudan, are the major recipients of FDI, with the rest vying for the scraps. Using panel data from 68 low-income and lower-middle income developing countries, this article strives to identify the factors that determine FDI inflow to developing countries. Based on a comparative discussion focussing on why some countries are successful in attracting FDI, the article demonstrates that countries with larger GDPs, higher GDP growth rates, higher proportion of international trade and a more business-friendly environment are more successful in attracting FDI.

Suggested Citation

  • Khondoker Abdul Mottaleb & Kaliappa Kalirajan, 2010. "Determinants of Foreign Direct Investment in Developing Countries," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 4(4), pages 369-404, November.
    • Handle: RePEc:sae:mareco:v:4:y:2010:i:4:p:369-404
    DOI: 10.1177/097380101000400401
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign Direct Investment (FDI); Developing Country; Low-income Country; Lower-middle Income Country; JEL Classification: F21; JEL Classification: F23; JEL Classification: O40;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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