ABSTRACT
Studies evaluating the impact of foreign direct investment (FDI) on host developing countries have usually addressed themselves to quantifying gross or net generation of incomes, savings, foreign exchange, and employment by individual or total FDI projects.1 This evaluation approach ignores the domestic alternative that may be possible in most cases (with or without foreign technology and loans). The direct balance of payment (BOP) effect in the case of an import substitution project is very likely to be negative and could be so even in the case of a local firm. From the point of view of evaluating the impact of FCEs on various parameters of development, therefore, examination of aspects that distinguish them from their local counterparts is more important. Furthermore, it has been argued, for instance by Cohen (1975), and Newfarmer and Marsh (1981), that the impact of FDI on development would be ‘minimal’ if the foreign controlled and local firms behaved in a similar way.
