ABSTRACT
This chapter will survey the relevant literature on foreign direct investment, and in particular Japanese FDI, and economic development germane to this research. The first section seeks to define FDI and the gains to be garnered by an economy from the location of multinationals (MNEs). The second section outlines the basic theories of FDI, and traces the development of Japanese FDI theory. The third section examines the impact of FDI with respect to the development of agglomerations in the forms of clusters, free trade zones and growth poles, and their attendant vertical, horizontal and complementary linkages. It contrasts traditional perspectives on MNEs as exploiting developing economies and highlights the benefits that may accrue to a developing economy through the exploitation of MNEs. The fourth section provides an overview of the literature on Japanese FDI with respect to characteristics and determinants of home country FDI. The fifth section examines the relatively sparse literature on FDI in China with respect to characteristics and determinants of FDI. Finally, the summary will emphasize the main pillars of this research.
