Foreign Direct Investment: Evolutions and Trends in Developing Nations

1096 Words 5 Pages
The world economy has evolved over the past few decades in an extreme fashion, regarding investment in particular and the way globalized enterprises are now investing in the developing world to increase their production, assets, and interconnected market networks (Foreign Direct Investment in Developing Countries, Finance and Development/March 1999). As a result of the changing trends of Foreign Direct Investment, developing countries have either benefited from them or stood behind others without any progress. Overall, even though FDI has experienced a decline since 1999 (opposed to the increase from the 1980's up to 1999) we can see that certain nations, like China, have increased their inflows relevant to Gross Domestic Product very …show more content…
Such changes include China coming up as one of the biggest countries to receive DFI and the reduction of FDI in other areas, like Latin America. As a result of worldwide economic liberalization since the 1990s, regional competition has increased in reality. The privatization of companies, the local economic integration and telecommunication advances have all contributed to the evolution of FDI in terms of geography where flows have shifted and acquisition of investment information has increased (Globalization, Foreign Direct Investment and Technology Transfers; pp. 200). In turn, networking strategies have been developed moving away from traditional ones that enable firms to take advantage of market liberalization and the `regional integration' by enhancing their competitiveness and competencies.

Another incentive for prospects of FDI in developing countries has moved from location advantage to competitive advantage. Before, investing firms based their FDI motives on natural resource allocations, cheap labor and production. Now, it is becoming a bigger trend for these firms to count more on the `availability of knowledge creating activities' that allow them to exploit their advantage over competition through the new technology they bring to the developing countries. A further incentive deals with `asset control' that leads to cost reduction and larger markets in which
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