Determinants of Foreign Direct Investment in South African

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Acknowledgement

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

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Abstract

Global Foreign Direct Investment (FDI) flows increased powerfully in the 1990s, giving increase to nearly 54,000 transnational companies, and has since developed quickly at a rate overhead global economic growth rates. Recorded global inflows increased by a mean of 13% a year throughout 1990-1997, in evaluation with the mean rates of 7% both for world trade items of items and non-factor services and for world GDP at present charges. Because of the large figures of cross-border amalgamations and acquisitions (M&A), these inflows expanded by a mean of almost 50% a year throughout 1998-2000, coming to a record of US$ 1.388 trillion in 2000. Inflows turned down to US$ 559.6 billion in 2003, mostly as an outcome of the pointed fall in cross-border M&A amidst the evolved countries. In supplement, the worth of cross-border M&A turned down from the record US$ 678.8 billion in 2002 to about US$ 559.6 billion in 2003.

Table of Contents

CHAPTER # 1: INTRODUCTION6

Introduction6

Background10

Interest of the Research13

Purpose of the Research13

Aims of Research14

Research questions14

Definition and Types of FDI15

CHAPTER # 2: LITERATURE REVIEW17

Vernon's product life cycle theory17

Foreign Direct Investment19

An Overview and Application of FDI Theory19

Government and the Impact of Investment Policy22

The Advantages of FDI Theory26

Eclectic Paradigm28

Applications of Eclectic Paradigm Concept33

CHAPTER # 3: METHODOLOGY38

Quantitative and Qualitative Study38

CHAPTER 4 EMPIRICAL RESULTS42

FDI Models Using Equation42

Portfolio Investment Models Using Equation51

CHAPTER #5: DISCUSSION & CONCLUSION55

Conclusion60

REFERENCES63

Chapter # 1: Introduction

 

Introduction

Developed nations have foremost leverages over the FDI inflows and outflows, accounting for 94% of outflows and over 70% of inflows in 2001 (IMF, 2003). Inflows of FDI to evolving nations increased by a mean of 23% a year throughout 1990-2000 (see Figure 1-1). In 2001, the inflows turned down by 13% to US$ 215 billion (IMF, 2003). The down turn, although, was mostly accounted for by the down turn in FDI inflows in three (developing) finances - Hong Kong, Brazil, and Argentina. This was due to the malfunction of government economic principles in Brazil and Argentina, and the outbreak of the sickness critical acute respiratory syndrome (SARS) in Hong Kong (UNCTAD, 2004). Excluding these three finances, FDI inflows into evolving nations expanded by about 18% in 2001 (IMF, 2003). During 1998-2001, FDI inflows to evolving nations attained US$ 225 billion a year.

According to Kumar (2003, p. 6) “FDI generally flows as a package of assets encompassing, in addition to capital, output expertise, organizational and managerial abilities, marketing know-how, and even market access through the marketing systems of multinational enterprises (MNEs) who attempt FDI”. These skill-resources are inclined to spill over ...