Foreign Direct Investment Theories

European Journal of Interdisciplinary Studies

Foreign Direct Investment Theories: An Overview of the Main FDI Theories
Vintila Denisia
Academy of Economic Studies, Bucharest, [e-mail]

Abstract
Foreign Direct Investment (FDI) acquired an important role in the international economy after the Second World War. Theoretical studies on FDI have led to a better understanding of the economic mechanism and the behavior of economic agents, both at micro and macro level allowing the opening of new areas of study in economic theory. To understand foreign direct investment must first understand the basic motivations that cause a firm to invest abroad rather than export or outsource production to national firms. The purpose of this study is to identify the main trends in FDI theory and highlight how these theories were developed, the motivations that led to the need for new approaches to enrich economic theory of FDI. Although several researchers have tried to explain the phenomenon of FDI, we cannot say there is a generally accepted theory, every new evidence adding some new elements and criticism to the previous ones.

Keywords: foreign direct investments, internalization theory, eclectic paradigm JEL Classification: E60, F21

Introduction
Nowadays the issue of foreign direct investments is being paid more attention, both at national and international level. There are many theoretical papers that examine foreign direct investments (FDI)’s issues, and main research on the motivations underlying FDI were developed by J. Dunning, S. Hymer or R.Vernon. Economists believe that FDI is an important element of economic development in all countries, especially in the developing ones. The conclusion reached after several empirical studies on the relationship between FDI and economic development is that the effects of FDI are complex. From a macro perspective, they are often regarded as generators of employment, high productivity, competiveness, and technology

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