Foreign direct investment (FDI) is a major channel of technology transfer to developing
countries. But, not all developing countries are able to attract FDI flows for various
reasons. The debates on issues relating to FDI to developing countries and its impact
have mainly focused on the strategies of the investing firm and the policies of the host
countries. Studies show that the macro policies and the business environment of host
countries play a vital role in attracting FDI as well as in deriving full benefits of FDI.
However, the third key agent in the process, the home countries and the influence of
their policies on the direction of FDI flows and in creating a positive impact on host
countries has received very limited consideration.
The international community is now turning its attention to the role of the home
countries in improving the quantity and quality of FDI to developing countries. This
paper examines the extent of measures adopted by home countries in order to influence
FDI flows and technology transfer to developing countries by studying how they
promote outward investments. The main findings are, first, that outward investment
agencies are presently exerting limited influence in directing the FDI flows to
developing countries and even less to least developed countries, although they have the
capacity to do it. Second, the agencies do take into consideration the development
impact in the recipient countries, but the actual measures for technology transfer and the