Publication

This paper examines whether foreign direct investment (FDI) has a positive effect on economic growth by analyzing convergence regressions derived from a model of endogenous technological change. The authors put into question the commonly held belief of FDI as a means to induce economic catching-up processes of developing countries. They conclude that the central challenge facing policymakers is not to attract FDI, but to improve the local conditions required to benefit from the widely perceived unique advantages of FDI. In addition, they hold that FDI stocks do not adequately reflect FDI-related economic activities.