Antecedents of Foreign Direct Investment: A Review Study

This paper provides a narrative review of the factors that influence foreign direct investment (FDI) in an economy. The articles relied on to assist in this regard were from relevant literature gotten through the search of published studies in major databases, namely Scopus, Google Scholar, DOAJ, Science Direct, and Semantic Scholar, using keywords such as foreign direct investment determinant, economic growth, and development. Articles published after 2005 were mainly included in the study. The study identified some variables that determine FDI uptake and highlighted that factors influencing FDI differ as one moves from one place to another, especially when these areas are not at par in terms of development. Trade openness, gross domestic product (GDP) growth, natural resources, political stability, the regulatory framework, market size, corruption levels, human capital levels, and inflation appear to be the main factors influencing FDI inflows. Other factors are the exchange rate, corporate governance, and tax incentives, among others.