tinational corporations (MNCs) and host governments in developing countries that are typically recipients of FDI have changed from being predominantly adversarial and confrontational to nonadversarial and cooperative (Ramamurti, 2001). This may be due in part to the overarching effects of globalization and the emergence of new trade relationships, both of which are understood as important catalysts for economic growth in developing countries. Further, as Makki and Somwaru (2004) have pointed out, FDI is an important vehicle of technology transfer from developed to developing countries that stimulates domestic investment and facilitates improvements in human capital and institutions in the host countries.
Researchers have reported that globalization removes barriers between nations both physical and fiscal, and increases businesses in an interconnected global economy (Welford & Prescott, 1996). Globalization facilitates national and international development and provides countries with financial support that is needed to develop its economic infrastructure (Obstfeld, 2000). Technological and political changes have influenced the globalization process allowing for cross-border security purchases (Obstfeld, 2000). Financial markets have also undergone a transition due to globalization; investors from one country are able to make a major investment in another country and finance in general has a global existence beyond national capital market limits (Rafferty, 2000). The stock exchanges and banking systems are going global as well (Hausler, 2002; Kroll, 2002).
While globalization has resulted in positive changes there are disadvantages of this process. Rafferty (2000) pointed out that with globalization comes the requirement to develop accountability and regulatory mechanisms, which requires political cooperation between governments but includes international corporate competition (Hausler, 2002). With globalization, the ...