ABSTRACT
This chapter reviews the impact of Foreign direct investment (FDI) on human resources development, technology transfer, international trade and capital formation – famously known as the FDI spillover process, and hence economic growth in host developing countries. It describes the theory including an introduction to the theories of growth and reviews the empirical findings. Economic growth involves an interrelationship between economic, political and social factors. Neo-classical economists introduced the concept of convergence in their models which assumed diminishing returns to capital and hypothesised that poorer economies that have a lower initial level of capital stock per worker tend to have higher returns and higher growth rates which eventually make them catch-up or converge with the richer economies in the long-run. Advances in knowledge and the diffusion of new ideas and objectives are necessary to remove economic backwardness and instil human abilities and motivations that are favourable to economic growth achievement.
