All Theses, Dissertations, and Capstone Projects

Year of Award

1988

Degree

Master of Business Administration (MBA)

College

College of Business & Professional Studies

Degree Program

Business

Department

Business Administration

Keywords

investment, political, foreign, trade, standard of living, GDP, World Bank

Abstract

Nearly all developing countries actively seek capital and technology from the advanced and developed countries. Direct foreign investment still remains a substantial source of capital and is sometimes the only source of specific technologies. Indeed, given the slow growth in official external assistance, developing nations are becoming more dependent on direct foreign investment.

Furthermore, the U. S. and other major capital exporting countries would prefer, for economic as well as ideological reasons, to channel more of their capital outflows to developing countries through private investment.

It is therefore highly probable that developing nations will continue to rely on direct foreign investment in the foreseeable future to carry out their developing programs.

Before a country or individual investor can undertake a massive foreign investment programme a number of conditions have to be fulfilled. First, a considerable degree of economic growth have to be achieved in the country to ensure that domestic savings were accumulated fast enough to provide the surplus of funds.

Second, there has to exist abroad a number of government or business enterprises willing and anxious to borrow, or alternatively, numerous opportunities for profitable business ventures for direct investment.

Third, some form of machinery is required to ensure that the transfer of funds from investors in one country to borrowers in another proceed with a minimum of friction—in other words, a fairly diversified capital market is needed and one capable of undertaking foreign investment. Finally, an incentive to invest abroad has to present itself. Undoubtedly, the prospect of earning a higher rate of return on one's investment by placing it abroad rather than at home is a major determinant of the volume of foreign lending.

It is against this background that the present thesis seeks to identify determinants of direct-foreign investment flows in developing nations.

Document Type

Restricted Thesis

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