There thus appears to be a significant lack of consensus
between practitioners and the empirical literature regarding
the existence of positive FDI externalities. Do the
negative results impugn government policies that attract
FDI? Should developing countries shun, rather than attract,
FDI? Any answer to such questions must be informed
by an understanding of the evolution of the
literature on FDI, an overview which reveals two recent
trends to be of particular importance. One is the recognition
that benefits generated by FDI are not exogenous,
but rather conditional on the presence of complementary
policies and conditions by which such benefits are facilitated
and absorbed. The other is the effort to understand
the mechanisms through which FDI affects growth, in
particular the linkages generated between foreign and
domestic firms.