The International Business Environment Essay Example | Topics and Well Written Essays - 3750 words

The International Business Environment - Essay Example This research will begin with the statement that in the present state of the global economic situation, the concept of Foreign Direct Investment (FDI) has attracted significant attention both domestically and globally. As such, FDI has been regarded as a vital element to consider in evaluating the economic development of countries around the world, particularly developing ones. Different empirical studies reveal that the relationships that prevail between economic development and FDI are multifaceted. From a macro aspect, FDI indicators represent high productivity, employment situation, technological spillovers, and competitiveness. For the less developed countries, FDI represents access to international currencies and markets, higher exports, and a source of financing. Research shows that FDI plays a vital role in promoting local firms. The efforts that countries make to help them attract FDIs result from the positive influences they have in an economy. FDI boosts productivity, tran sfer of technology, know-how, managerial skills, unemployment reduction, international production systems, and access to foreign markets. In this case, FDIs should be considered as ways of realizing technological spillovers, which have the significant contribution to the growth of an economy as opposed to the case of national investments. This practice leads to advanced technologies’ spillovers to local enterprises. Conversely, FDI has the potential of crowding out local firms, leading to negative impact on the economic development of a country. Various researchers stipulate that the positive effects associated with FDI are few and that most of the resulting effects are negative. Though FDI is associated with particular positive effects, the relationship that prevails between them and economic development are inconsistent. The potential negative or positive effects resulting from FDI on an economy are also dependent on the sectors nature, in which an investment will be carrie d out. For instance, the benefits of mining and agricultural sectors are limited.