Foreign Direct Investments - A shortcut to Development and Economic Growth?

Abstract

Foreign direct investment has grown substantially since the energy crisis during the 1970s, meanwhile countries in the East Asia & Pacific area has experienced growth rates pursuant to established convergence theories. This study examines the effect made by foreign direct investment on economic growth and development through technological spillovers. Data from eight different countries from Asia are investigated in a panel data analysis, four developed and four less developed in order to conclude any significant effect of FDI but also to compare if there is a difference in the effect between developed and transitional countries. The result of this study suggests that there is a positive significant effect on growth in transitioning countries. Therefore, this paper shows that there is a difference between developed and transitional economies regarding the effect of FDIs.