Analyses of FDI determinants in developing countries

Purpose – The purpose of this paper is to investigate the best determinants of foreign direct investment (FDI) in developing countries. Design/methodology/approach – This paper investigates whether FDI determinants affect FDI based on both a panel of data (FMOLS‐fully modified OLS) and cross‐section SUR (seemingly unrelated regression) for 24 developing countries, over the period 1983‐2005 for FMOLS and 1976‐2005 for cross‐section SUR. Findings – The interaction of FDI with some FDI determinants have a strong positive effect on economic progress in developing countries, while the interaction of FDI with the total debt service/GDP and inflation have a negative impact. The most important determinant of FDI is the communication variable. Research limitations/implications – The limitations of the study are based on the development of data set which could be found uninterrupted for 30 years in 24 developing countries. Originality/value – The main objective of this study is to define the main FDI determinants that show the capital flows to developing countries in a globalization framework. The secondary objective of this study is to assign countries' convergence by using the same FDI determinants. FDI flow is one of the main dynamics of globalization phenomenon thus FDI flow determinations will contribute to countries' process of political development.