A Critical Reading of the Main Foreign Direct Investment Theories

Abstract: The literature on Foreign Direct Investment is abounding with partial theories. Each one looks at FDI from a different perspective and considers different sets of determinants. These theories varied in terms of structure, aim as well as methodology, hence the various classifications and streams of thought.

The present paper contributes to the current literature by providing a critical reading of Foreign Direct Investment’s most important theories and their origin. We trace back the genealogy of the different lines of thoughts and paradigms and ways in which they shaped the theoretical reflections on Foreign Direct Investment. An analysis at the macro- and micro-economic levels is presented under both perfect and imperfect market assumptions.  

Keywords: foreign direct investment; FDI theory; flow; market paradigms, market imperfection

        JEL codes : E60, F12, F21, F23