Studies and Analyses

Bogdanovska Gj., Andrijana

Recommended reference: Bogdanovska Gj., Andrijana, FDI Impact on the Economic Growth in the Developing Countries (2000-2010) (July 10, 2011). Available at SSRN: http://ssrn.com/abstract=1941665

ABSTRACT

Foreign Direct Investments (FDIs) are a valuable tool for internationalisation of businesses in the global economy. They are seen as an instrument for technological development, knowledge transfer, economic growth and productivity enrichment.

The aim of the study is to analyse the impact of inward FDIs onto the economic growth in developing countries for the past decade. The research methodology used is based on the deductive research approach, based on quantitative data generated from secondary sources and a time-series analysis on a sample of developing nations. 

The results provide an updated analysis on the impact of FDI on the economic growth through the application of several control factors. Findings indicate that inward FDIs were attracted to the developing nations with higher availability of educated labour, higher government spending and more efficient quality of governance. In the process, the level of education although significant, was not recognised as a factor with strong effect, implying that the level of education (secondary education) is losing its overall value and is becoming a cost for the developing nations.

The findings and conclusions of the study are valuable for designing future policies and procedures and are especially beneficial for international organisations and governments, management of MNEs and the private sector.