Foreign Direct Investment: Theory, Evidence And... -

: Many studies find that FDI only boosts growth if the host country has reached a certain level of "absorptive capacity." Key factors include human capital (a skilled workforce), financial market development , and institutional stability .

: Raymond Vernon argued that products go through stages—innovation, maturation, and standardization. As a product matures and production becomes standardized, firms move facilities to lower-cost countries to stay competitive. 2. Empirical Evidence on Economic Impact Foreign Direct Investment: Theory, Evidence and...

: Evidence for "horizontal spillovers" (benefits to local competitors) is often weak, as multinationals actively guard their technology. However, "backward linkages"—where foreign firms upgrade the capabilities of their local suppliers—show more robust positive effects. : Many studies find that FDI only boosts

: Focuses on reducing transaction costs. Firms internalize activities across borders when the costs of using external markets (e.g., enforcing contracts or protecting IP) are too high. : Focuses on reducing transaction costs

: Developed by Hymer, this posits that firms must possess unique "firm-specific advantages" (e.g., proprietary technology, brand power) to overcome the "liability of foreignness"—the inherent disadvantages of operating in a distant, unfamiliar environment.