The effects of macroeconomic factors on foreign direct invesments: A sectoral approach

There is a long standing belief that foreign direct investment (FDI) inflows help the countries to have the opportunity to make further improvements. In recent decade, this belief strengthened by the fact that faster growing economies tend to attract more FDI. Even if the direction of causality between FDI and growth is not absolute yet, positive impacts of FDI such as transferring technology or creating employment are enough attractive for policymakers. Consequently, investigating factors that pull FDI into country became a crucial topic in International Business and Economics literature. Even though there is a huge scale of written literature focuses on investigating effects of these factors on FDI location, there is still lack of studies taking related sectors into consideration.The main purpose of this dissertation is to investigate the influence of the macroeconomic factors on FDI location by taking related sectors into account. Consistent with this purpose, some important macroeconomic FDI determinants are identified based on theoretical framework of FDI and then these factors are tested empirically through PLS method by using a panel data set which breaks down FDI flows into primary, manufacturing and services sector investments. The data set employed in empirical part of the dissertation covers 24 OECD member countries, over eleven years period between 1999 and 2010.The main finding of the study is that primary, manufacturing and services sector FDI affected in different levels and ways from macro economic factors. Moreover, it is observed that FDI decisions related to primary sector show low linkages with macroeconomic factors compared to the other sector sectors investigated.