Foreign Direct Investment in Renewable Energy in Developing Countries: How does Foreign Direct Investment Influence the Economic and Social Landscape of Developing Countries

Abstract

The renewable energy (RE) industry has gained significant momentum over the past years. This has led to an increase of investments both at national and international levels. As a result, developing countries also benefit from this development. However, recent research on FDI in developing countries has started to doubt the positive effects of FDI on economic growth. Unlike traditional theories where FDI is associated with the creation of knowledge and technology spillovers more recent research has found that this must not necessarily apply. Popular arguments include that FDI must not lead to additional capital formation (through M&As) and that possible positive backward linkages cannot be seen as a result of government or regulation efficiencies or the lack of human capital. Thus, this thesis is going to examine these issues. Through the use of quantitative data, cointegration modeling and multiple regression analysis a largely positive impact of FDI in RE on the economic growth will become evident.