Determinants of Foreign Direct Investment Inflows: A Review of the Recent Literature

Abstract

There have been considerable increases in the flows of foreign direct investment in the world as of 1980s together with globalization. The increases in the flows of foreign direct investment have caused the numerous studies to be conducted about macroeconomic and microeconomic impact of foreign direct investments and determinants of foreign direct investments. This study overviews the literature about determinants of foreign direct investment inflows. The extensive studies have revealed that market size, economic growth, inflation, trade and financial openness, human capital, institutional quality, infrastructure, political stability, taxes and population are major determinant of foreign direct investment inflows.