The Impact of Foreign Direct Investment on the Performance of the Host Economies (Essay Sample)

The Impact of Foreign Direct Investment on the Performance of the Host Economies Name: Institution: The Impact of Foreign Direct Investment on the Performance of the Host Economies Foreign Direct Investment (FDI) has a profound effect on the host country. In the last two decades, Trans National Companies (TNC’s) have employed Foreign Direct Investment as a source of financing developing countries. The success of an FDI depends on the country of origin, market conditions, business systems, and organizational characteristics of the TNC (Fortanier, 2007). For this case, different FDI’s have various effects on the host country; thus, the paper will analyze the impacts of FDI on the performance of host economies. Research indicates that FDI has a significant effect investment in not only economic growth, but also relocating cleaner technology to responsible corporate strategies. The benefits of FDI do not happen automatically and vary between states; thus, making it difficult to separate and measure the effects of FDI. FDI can make a substantial impact on an economy by supplying capital (Kurtishi-Kastrati, 2013). A significant number of Multinational Enterprises (MNE’s) have access to financial resources and risk investing in other countries for higher returns. The investment of these companies allows free flow of capital in the host country. Additionally, FDI plays a vital role in the technological development of the host country. Many developed states lack sufficient knowledge and equipment’s to carry industry specific activities; thus, the technology that comes with MNE’s brings about technological development in the host country. Moreover, host countries also benefit from essential management services that are coupled with FDI. Local personnel are trained to work in managerial positions of foreign MNE’s; hence, stimulating the local companies to improve their management skills (Kurtishi-Kastrati, 2013). Equally important, FDI has direct and indirect effects on employment in the host country. Most developed countries experience scarce financial resources but have an enormous amount of labor, this, in turn, results in a massive employment...