Bangladesh Hr

Topics: Capital accumulation, Investment, Development Pages: 8 (2428 words) Published: July 29, 2013
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 :

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Sharma*, 2Stuti Priyadarshni Nijhawan and 3Richa Sharma

Professor, Department of Management & Commerce, Swami Vivekanand Subharti University, Meerut, Uttar Pradesh, INDIA. *Corresponding Author :


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 talent, a finding that MNEs displace domestic firms would also cast doubts on the favorable development effects of FDI. These are all the important questions when one considers FDI as an important contributor of economy. FDI, as a share of total gross fixed capital formation is a significant and growing magnitude in developing countries. In fact, FDI is a much larger proportion of investment in developing than in developed countries, so it is important to study the impact of FDI on the socio-economic factors of developing economy. Keywords : Foreign Direct Investment, Socio Economic Factors, Developing Countries, Technological Transfer, Trade,

Human Capital. 1. INTRODUCTION Among the different forms of capital flows, academics and policymakers, talk about foreign direct investment (FDI) the most. This is because of several benefits of FDI and its importance in the world economy vis-à-vis other forms of capital flows. In the past fifteen years, FDI has been the dominant form of capital flow in the global economy, even for developing countries. Opening an economy for FDI attracts great attention and likewise many opinions pop-up. People, who oppose the opening up of economies to foreign investors condemn FDI as risky and destabilizing for developing economies. At the other end of the spectrum, supporters vouching for FDI say that it is stable and is a source of advanced technology and better managerial practices. So it is good for developing economies. The reality, however, is that it is not easy to draw any conclusions. A number of factors come into play to determine the growth and development effects of FDI. Therefore, here we have discussed some of the crucial socio economic factors of developing countries which are affected by FDI. The following research and information dissemination can rectify some of the misconceptions regarding FDI in developing countries. The following graph is showing the Year wise FDI in developing countries .We can see...

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