Determinants of FDI Attractiveness: A Systematic Literature Review

Abstract

Abstract: Foreign direct investment (FDI) plays an essential role in the growth of developing and developed nations, making it important to explore the determinants that attract investors to a host country. While several studies have examined FDI determinants, a comprehensive and systematic review is still limited. This paper conducts a systematic literature review (SLR) of 60 articles published between 2001 and 2024 in the Scopus database to identify the key factors of FDI attractiveness. Following the PRISMA protocol, the review categorizes the findings into five major dimensions: (1) economic factors, (2) human capital and labor market conditions, (3) government policies and regulations, (4) infrastructure and logistics, and (5) political stability and institutional quality. The synthesis reveals that while traditional drivers such as market size and trade openness remain significant, institutional quality and governance are gaining prominence, particularly in emerging economies. The findings provide insights for managers and policymakers. Governments can enhance FDI inflows by improving regulatory frameworks, infrastructure, and institutional quality, while investors may use these determinants to identify favorable host-country environments.