Location Determinants and the Host-Country Impact of Foreign Direct Investment in Zimbabwe

Abstract

The importance of foreign capital in Zimbabwe's industrial and economic development cannot be over-emphasised. Indeed, foreign investment is regarded as a major component of the adjustment effort in the country's on going program of economic reform. The country has embarked on a campaign to attract more foreign investment through multinational corporations (MNCs) to complement the limited domestic savings in promoting investment. This study is focused on analysing the host-country factors which may influence the location decisions of multinational firms in Zimbabwe and also the macroeconomic effects of foreign direct investment (FDI) on the country's private domestic investment, trade and economic growth in the period 1980 to 1993. The economic model used in this study is based on Dunning's (1974; 1988) eclectic paradigm of international production. The three-stage least squares (3SLS) technique is applied to estimate the multi-equation economic model simultaneously.