The effects of FDI, trade and absorptive capacity on countries economic growth

Multinational firms have played an important role in the transmission of capital, technology and knowledge, manufacturing strategies and especially in the development of emerging economies. Developing countries seek to attract these multinational firms to build modern manufacturing industries, and especially to get access to knowledge and technologies. Foreign direct investment (FDI), trade, and absorptive capacity are viewed as a powerful forces for the integration of developing countries into the global economy which can influence host country’s macroeconomic performance. The goal of the study is to test and measuring the impact of absorptive capacity, trade (openness), and FDI on economic and manufacturing growth. Empirical results showed that the benefits depend heavily on FDI. FDI affects and stimulates the economic growth of host countries.

Keywords:

Foreign direct investment (FDI) , trade , and absorptive capacity