The determinants of international direct investment: a critical evaluation

Abstract

The purpose of this paper is to survey and critically evaluate the relevance of the received theory in identifying the factors that influence the origin and growth of international production. In interpreting the various explanations of the origin and growth of the international operations of enterprises, one is very conscious of the particular interests of the researcher. This is shown both in the type of questions arked, and the approach and techniques used to answer them. The questions «why do firms invest overseas?» «Where do firms locate their foreign activities?» and «what determines the amount and composition of international production?» are similar, but not identical. Each is concerned with the determinants of the behavior of firms, but, while the first draws on the techniques of micro-investment theory, the second is a matter for the location theorist, and the third needs a knowledge of international trade and industrial organization theory. Moreover, each of the questions may be tackled from a positive or a normative viewpoint and with national or cosmopolitan interest in mind.