Bangladesh Hr
VSRD International Journal of Business and Management Research, Vol. 2 No. 11 November 2012 ISSN No. 2231-248X (Online), 2319-2194 (Print) © VSRD International Journals : www.vsrdjournals.com
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RESEARCH COMMUNICATION
ROLE OF FDI IN SOCIO-ECONOMIC GROWTH OF DEVELOPING COUNTRIES
1Reema
Sharma*, 2Stuti Priyadarshni Nijhawan and 3Richa Sharma
Professor, Department of Management & Commerce, Swami Vivekanand Subharti University, Meerut, Uttar Pradesh, INDIA. *Corresponding Author : reemasharma2011@gmail.com
1,2,3Assistant
ABSTRACT
FDI is generally defined as “A form of long term international capital movement, made for the purpose of productive activity and accompanied by the intention of managerial control or participation in the management of foreign firm.” Foreign direct investment (FDI) is prized by developing countries for the bundle of assets that multinational enterprises (MNEs) deploy with their investments. Most of these assets are intangible in nature and are particularly scarce in developing countries. They include technology, management skills, channels for marketing products internationally, product design, quality characteristics, brand names, etc. In evaluating the impact of FDI on development, however, a key question is whether MNEs crowd in domestic investments (as, for example, when their presence stimulates new downstream or upstream investments that would not have taken place in their absence), or whether they have the opposite effect of displacing domestic producers or pre-empting their investment opportunities. This is an important issue. In recent theoretical and empirical work, investment has been identified as a key variable determining economic growth. Thus, if FDI crowds out domestic investment or fails to contribute to capital formation, there would be good reasons to question its benefits for recipient developing countries. Moreover, given the scarcity of domestic entrepreneurship and the need to nurture existing entrepreneurial
/ 559
RESEARCH COMMUNICATION
ROLE OF FDI IN SOCIO-ECONOMIC GROWTH OF DEVELOPING COUNTRIES
1Reema
Sharma*, 2Stuti Priyadarshni Nijhawan and 3Richa Sharma
Professor, Department of Management & Commerce, Swami Vivekanand Subharti University, Meerut, Uttar Pradesh, INDIA. *Corresponding Author : reemasharma2011@gmail.com
1,2,3Assistant
ABSTRACT
FDI is generally defined as “A form of long term international capital movement, made for the purpose of productive activity and accompanied by the intention of managerial control or participation in the management of foreign firm.” Foreign direct investment (FDI) is prized by developing countries for the bundle of assets that multinational enterprises (MNEs) deploy with their investments. Most of these assets are intangible in nature and are particularly scarce in developing countries. They include technology, management skills, channels for marketing products internationally, product design, quality characteristics, brand names, etc. In evaluating the impact of FDI on development, however, a key question is whether MNEs crowd in domestic investments (as, for example, when their presence stimulates new downstream or upstream investments that would not have taken place in their absence), or whether they have the opposite effect of displacing domestic producers or pre-empting their investment opportunities. This is an important issue. In recent theoretical and empirical work, investment has been identified as a key variable determining economic growth. Thus, if FDI crowds out domestic investment or fails to contribute to capital formation, there would be good reasons to question its benefits for recipient developing countries. Moreover, given the scarcity of domestic entrepreneurship and the need to nurture existing entrepreneurial
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