Determinants of Foreign Direct Investment: A Systematic Review of the Empirical Studies

Abstract

A growing body of literature is concerned with the factors that determine the inflows of foreign direct investment (FDI) into a host country. However, hardly any literature has been carried out to provide a systematic literature review (SLR) of the FDI determinants. An SLR methodology underlies this conceptual paper to evaluate and categorise a literature survey of 112 empirical studies published from 2000 to 2018. The result indicates that the size of the host market is the most robust determinant, followed by trade openness, infrastructure quality, labour cost, macroeconomic stability, human capital, and the growth prospect of the host country. Market size is highly significant in virtually all studies. This partly reflects the fact that most of the world’s FDI are market-seeking. This study provides a clear understanding of the scope of the research in the field of FDI determinants as the practical implication for future research.