Foreign Direct Investment & Developing Countries, How to Attract Trans-National Corporations

Abstract: The thesis studied the localisation determinants of foreign direct investment, in order to achieve a better understanding of how developing countries may attract FDI and acquire capital and technology. The examined determinants are based on previous research and economic theories. Founded on localisation advantages, an econometric regression analysis is used as a method to test the relevant location determinants of FDI inflows into host developing countries. The results support the hypothesis relatively well. The general conclusions are that foreign direct investment inflows from previous years, the foreign direct investment stock, gross domestic product, economic growth, infrastructure, and productivity are significant for FDI inflows. Current inflows appear to be path dependent since they are highly dependent on previous inflows and the accumulated stock. Latin America is distinguished from the other developing regions because it seems to attract FDI relatively easier.