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Multinational Corporations and Foreign Direct InvestmentAvoiding Simplicity, Embracing Complexity$
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Stephen D. Cohen

Print publication date: 2007

Print ISBN-13: 9780195179354

Published to Oxford Scholarship Online: May 2007

DOI: 10.1093/acprof:oso/9780195179354.001.0001

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 Effects of Foreign Direct Investment on Less Developed Countries

 Effects of Foreign Direct Investment on Less Developed Countries

Vagaries, Variables, Negatives, and Positives

(p.179) 8 Effects of Foreign Direct Investment on Less Developed Countries
Multinational Corporations and Foreign Direct Investment

Stephen D. Cohen

Oxford University Press

One of the most sensitive issues regarding FDI and MNCs is their impact on relatively less developed countries (LDCs). This chapter makes no effort to “prove” net harm or benefits to LDCs. Instead, the thesis developed here is that it is impossible to determine scientifically that all MNCs are collectively harmful or beneficial to all LDCs on a permanent basis. To demonstrate the critical importance of heterogeneity, complexity, perceptions, and the fallacy of generalization, the nature of the conceptual obstacles to a definitive black-or-white judgment is examined. An examination of the many plausible arguments that incoming FDI is harmful on balance to the economic development of LDCs is followed by an examination of the many plausible arguments on behalf of the opposite conclusion, namely that on balance FDI has had a positive impact. A fourth section focuses on the difficulty in determining whether pre-existing economic conditions in a developing country determine the effects of incoming FDI, or whether FDI itself determines economic progress. The final section makes the case that the preferred answer to the question of the impact of MNCs and FDI on economic development is that it is indeterminate.

Keywords:   less developed countries, economic development, emerging markets, resource-seeking FDI, anti-globalization, human capital

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