Entry for Encyclopaedia of Financial Globalization_85bd12f8-b1f2-4c66-9123-8f177fcf1f9b.docx

This paper examines the evolution of the literature on the relationship between foreign direct investment (FDI) and growth in host countries, particularly developing countries. It provides a broad overview, with a focus on two elements that have recently become particularly important, (1) the role of complementary local conditions conducive to reaping the benefits of FDI (which relate to when FDI will generate growth), and (2) the mechanisms by which FDI creates positive externalities (which relate to how FDI generates growth).