Effect of Foreign Direct Investment on Economic Growth of Australia

Running head: EFFECT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH
OF AUSTRALIA
Effect of Foreign Direct Investment on Economic Growth of Australia
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1EFFECT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH OF
AUSTRALIA
Executive Summary
In the research paper, evaluation has been made regarding the interconnectedness between
economic growth and foreign direct investment in Australia. The particular research question is
how inflow of foreign direct investment in Australia affects economic growth of Australia.
Research scholars have conducted extensive research in evaluating relationship of FDI to that of
economic growth of a nation. The consensus from past literature tend to conclude in favor of a
positive bearing of foreign investment on economic prosperity through gains in efficiency and
productivity. The evidences from empirical literature however are not free from ambiguity. The
influence of FDI differs across countries and even varies depending on period under
consideration.
Data on foreign direct investment and economic growth of Australia has been collected from
official websites. The considered period of time under study extends from 2007 to 2017. The
secondary data are then analyzed applying quantitative method of research.

2EFFECT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH OF
AUSTRALIA
Table of Content
1.Introduction...................................................................................................................................3
1.1 Problem Statement............................................................................................................3
1.1 Research aim and research question.................................................................................4
2. Literature review..........................................................................................................................4
2.1 Positive influence of FDI on economic growth.....................................................................4
2.2 Adverse effect of FDI on economic prosperity.....................................................................6
2.3 Hypothesis.............................................................................................................................7
3. Methodology................................................................................................................................7
3.1 Data collection.......................................................................................................................7
3.2 Data Analysis.........................................................................................................................8
4. Finding and Analysis...................................................................................................................8
4.1 Descriptive Statistics.............................................................................................................8
4.2 Bivariate Correlation...........................................................................................................10
4.3 Regression Analysis.............................................................................................................10
5. Discussion..................................................................................................................................11
5.1 Hypothesis: Foreign direct investment has a significant relation with economic growth...11
6. Conclusion.................................................................................................................................12
6.1 Addressing research aim and research question..................................................................12
6.2 Limitation............................................................................................................................13
6.3 Recommendation.................................................................................................................13
7. Reference List............................................................................................................................14

3EFFECT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH OF
AUSTRALIA
1.Introduction
` The present research paper is developed to scrutinize the bearing of foreign direct
investment on economic growth of Australia. The paper is divided in two sections. Research
background, research aim and relevant research question and theoretical and empirical literature
are discussed in the first section. Based on the research background and past literature, the final
part of the paper is developed with discussion of applied research methodology, analysis of
collected data and the final conclusion.
1.1 Problem Statement
The FDI infers an investment that is made to acquire a place in operation of a business
enterprise in place other than own investors residency. FDI can take either the form of greenfield
investment or the form of merger and acquisition. Investment is considered as foreign direct
investment if the foreign investor acquires at least 10 percent ownership share. Ownership below
that is considered as foreign portfolio investment. Cross border movement of capital is one of
the greatest contribution of globalization (Iamsiraroj & Ulubaşoglu, 2015). Attracting foreign
investment has now become one of major component of growth strategy for several developed
and developing nations.
Foreign direct investment benefits the economy of Australiain different ways. The stock
of FDI in 2015 was increased by 7.2 percent. Foreign investment in different new projects create
opportunities for new employment contributing to expansion of new jobs and economic growth.
The increased competition with foreign investors drive productivity growth in the nation
(dfat.gov.au, 2018). The access to foreign technology causes a proliferation in productivity of