Foreign direct investment and economic development

Abstract

Although transnational corporations play the crucial role as transplanters of technology, skills and access to the world market, how they facilitate structural upgrading and economic growth in developing countries has not been adequately conceptualized in terms of a theory of economic development. This article develops a dynamic paradigm o TNC-assisted development by recognizing five key structural characteristics of the global economy as underlying determinants. The phenomena of trade augmentation through foreign direct investment, increasing factor incongruity, and localized (but increasingly transnationalized learning and technological accumulation are identified as three principles that govern the process of rapid growth in the labour-driven stage of economic development and, eventually, the emergence of TNCs from the developing countries themselves also plays a role in this process.