Foreign Direct Investment into Developing Asian Countries: The Role of Market Seeking, Resource Seeking and Efficiency Seeking Factors

Abstract

According to eclectic theory of Dunning, FDI could be of four types: market seeking, resource seeking, efficiency seeking and strategic asset seeking. Market seeking factors of FDI such as market size, market growth, structure of domestic market, etc. aim at penetrating the local markets of host countries. While resource seeking investments are made in order to have access to cheap raw material, pool of labor, infrastructure, etc. New sources of competitiveness, economies of scope and specialization and low cost of production are some of the efficiency seeking factors of FDI. An attempt is made to study the impact of market seeking, efficiency seeking and resource seeking factors of host countries on FDI inflows of host countries by taking sample 10 Asian countries in the time period 1991 to 2008. Panel regression results show that all categories of FDI motivating factors have a significant impact on FDI inflows.