In the last decade, numerous studies have been conducted on the role of FDI in promoting growth and economic development (Hong 2014; Krasniqi 2018; Nistor 2014; Nixha 2017; Saswata Chaudhury 2020; Silajdzic and Mehic 2015, etc.). In studies conducted by different authors, there are findings both in favour and against FDI. Some argue that FDI contributes to economic growth and increased productivity in an economy and, thus, to economic growth and development in various countries, but others emphasise the danger that FDI can destroy local capabilities and extract natural resources without adequately compensating poor countries.
Silajdzic and Mehic (2015) found that FDI affects economic growth directly by contributing to gross fixed capital formation and indirectly by contributing to the stock of knowledge.
The positive effects of FDI inflows occur in many ways. FDI helps to increase investment by leading to the creation of new jobs and the generation of tax revenues, among other things, as Nixha (2017) found in his study.
Nixha (2017) concludes that FDI leads to a host economy increasing exports, improving the balance of payments, and in many cases reducing international financial constraints to economic growth. Meanwhile, Oyegoke (2021), in analysing the extent to which FDI inflows to Nigeria affected economic growth during the period 1981–2007, found that investments stimulated growth; therefore, there was a positive relationship between FDI and economic growth.
Sukar et al. (2006) has found that FDI contributes to employment in a local economy directly by creating new jobs and indirectly when local spending increases due to purchases of goods and services through the growth of new employees. All of this is expected to have positive multiplier effects in an economy.
Kamara (2013), in his study of 47 countries during the period 1981–1999, found that the impact of FDI on economic growth depended on the sector; for example, there were positive effects in the manufacturing sector, while the results for the service sector were unclear.
Positive associations between FDI and economic development were also found in studies (Oyegoke 2021; Gokmen 2021; Pegkas 2015; Chaudhury 2020) conducted in China, Pakistan, and the eurozone.
Other studies have found opposite results, showing that FDI tends to have non-significant (or even negative) effects on economic growth in host countries (Sukar 2006; Javorcik 2004; Ruranga et al. 2013), implying that FDI has a negative impact on economic development or that the relationship between FDI and economic growth is positive but that the effects are weak.
However, some studies have found a positive relationship between FDI and economic growth only in high-income countries. In their study, Alvarado et al. (2017) examined how FDI had a positive and significant effect on products in high-income countries.
The same opinion is expressed by Kulu (2021) in his study of 57 developing countries for the period 1980–1999, which shows that countries with high economic growth noticed the direct effect of investment, but this was not the case in countries with low economic growth.
It was shown in a study by Avazov (2021) that an increase in investment can lead to higher growth rates in financially developed countries than those observed in financially poor countries. Local conditions, such as the development of a country’s financial markets and educational levels, influence the impact of FDI on economic growth. Similarly, a study by Lakhbiz (2018) concluded that FDI has less of an impact on economic growth in the case of developing countries. In other words, these countries must have a certain level of development in education, technology, infrastructure and health to benefit from FDI.