| Economic freedom is both a means to as well as an objective of development. While researchers have established that foreign direct investment (FDI) is a stimulus for economic growth, less is known about its impact on the development of economic freedom within host countries. Foreign direct investors are generally believed to operate within the constraints imposed on them by their hosts. In this view, economic freedom is exogenous to the activities of multinational corporations. However, to the extent that free markets increase the value (or decrease the risks) of their investments, foreign direct investors may actively support economic liberalization. Economic liberalization may also result from spillovers and acculturation that are the byproducts of firm activities. On the other hand, if firms consider economic freedom to be detrimental to their interests, they will actively attempt to suppress host country freedoms in an effort to protect the value of their investments. In this view, foreign direct investors are catalysts for change within host countries. The objective of this dissertation is to determine if a direct relationship exists between the level of inward FDI and changes in economic freedom in host countries. We develop, for the first time in the literature, a theory of the impact of inward FDI on host country freedom. We then perform analysis of covariance to test our theory while controlling for extraneous factors. |
