The Impact of Foreign Direct Investment on Economic Development

This paper analyses the impact of foreign direct investment (FDI) on economic development, focusing on reducing regional disparities, modernizing infrastructure, and supporting the transition to a sustainable and digitalised economy. The central objective is identifying the ways in which FDI contributes to development and the conditions for maximising economic benefits. The research uses a qualitative methodology based on the comparative analysis of five case studies from the Western Balkans, Romania, France, Hungary, and the Czech Republic, this approach allowing a contextualized understanding of FDI dynamics in economies with different levels of development and identifying key factors such as public policies, infrastructure, the quality of institutions, and the level of workforce skills. The main results indicate that, in the Western Balkans, FDI has fostered economic progress through job creation and infrastructure development, but the limited capacity of skilled workforce hampers the attraction of investment in innovative sectors. In Romania, although FDI has stimulated the modernization of manufacturing industry, regional polarization persists, with major gaps in rural regions. France stands out by attracting FDI in strategic industries, such as energy and technology, but investment in tourism still remains below the economic potential. In Hungary, FDI has contributed to the accelerated development of the automotive industry, but the lack of sectoral diversification poses a long-term risk. In the Czech Republic, FDI has boosted the integration of SMEs into global value chains, but poor infrastructure and limited access to finance slow down regional development. The originality of research lies in the comparative and contextualized analysis of the impact of FDI on economic development in the five European regions, while highlighting the essential local factors determining their success.