The impact of FDI on the receiving country may be varied, though its positive contribution to resource availability, capital formation, transfer of managerial and organizational practices, skills and technology and access to international market networks cannot be over emphasized, the host countryâ€™s ability to take advantage of all these benefits of FDI depends to a large extend on the openness of the country, business environment, political and economic stability and a host of other factors.
The role played by FDI in developing countries has been an attractive subject for many theoretical and empirical studies. However, there are still inconclusive arguments in relation to the impact of FDI on economic growth. One school of thought is the opinion that FD I inflows have a positive impact on economic growth while the other school of thought is of the opinion that FDI inflows have no impact on economic growth.
The first school of thought sees FDI inflows as a means of changing the factor endowment of a country and increasing the stock of real physical capital of a country (Zheng et.al. 2000). Furthermore, FDI is seen as a major channel for technological diffusion from developed countries to developing countries because of the advanced technology embodied in the new capital equipment (Balasubramanyam et. al. 1996).
The second school of thought argues that FDI inflows are not put into productive ventures and hence they do not lead to the accumulation of real physical capital and therefore they do not have any growth impact on an economy.
Statement of problems 3
FDI and economic growth in ghana