Foreign direct investment, determinants, public policy, theories


According to the literature related to the movement of foreign direct investment (FDI) worldwide, there are two main causes for these flows. The first one is related to the decision taken by companies to invest in certain markets according to their own international strategy and, the second corresponds to the government’s policy designed to attract capital through the use of various factors such as infrastructure, skilled labour, cheap labour, industrial policy, natural resources, gross domestic product, the legal system, geographic location, cancellation fees, among others. Thus, governments attract capitals to certain types of industries using the attractiveness of their determinants. Considering the above approach, if a government wants to attract capital to an industrial sector different than to which traditionally it tries to attract, should it create new determinants to attract new investment flows? This paper proposes a new theory to attract new investment flows based on the creation of new determinants. To develop this new determinant creation theory, the case of Mexico is analyzed.

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