terprise abroad.
In recent decades, relations between multinational 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.
This review of literature will first, offer a general overview of FDI patterns and targets in recent years. It will then move to an examination of FDI flows with respect to specific regions and countries and the effects of these flows. Only FDI to developing countries are considered.
Ramamurti (2001) has stated that FDI flows into developing countries had a discontinuity in the 1990s. From only $20 billion in 1980, and $23.7 billion in 1990, FDI inflows rose to $166 billion in 1998, a 7-fold increase. In this same period, the stock of FDI in developing countries rose from 5 percent of gross domestic product (GDP) to 20.5 percent of GDP whereas imports and exports rose only slightly from 51.5 percent to 56.6 percent of GDP. FDI liberalization has been quite broad in the past 10 years (Ramamurti, 2001).
In discussing global FDI flows, Globerman and Shapiro (2002) commented that governance infrastructure is an important determinant of both FDI inflows and outflows. Investments in governance infrastructure not only attracted capital, they also create the conditions under which domestic MNCs emerge and invest abroad. These researchers believe, however, th...