Overview of Main FDI Theories

In the nineteenth century, classical economic theories (e.g. those of Adam Smith, David Ricardo) regarded international trade as a motor of economic internationalization and integration. Internationalization through trade was considered an essential catalyst for generating domestic wealth, especially when a country sought specialization in those economic activities where it had comparative advantages. Private companies had become the principal economic agents of the capitalist system in place, and leading scholars in countries with open economies like England favoured deregulation and liberalization in all possible spheres of economic life so that trade relations could be expanded with other countries. Unlike the ‘interventionists’ in France, the liberal ‘free traders’ in England and the United States emphasized the importance of a ‘natural order of things’ pushing for a lean State that would interfere as little as possible in the ‘invisible’ hand of the market, which would always find its own equilibrium.1