Foreign and domestic private investment in developing and emerging economies: A review of literature

Abstract

This study surveys and synthesizes the literature on foreign and domestic private investment over the period 1980–2022 with evidence from developing and emerging economies. The documentary sources method was used to examine one hundred and forty (140) peer-reviewed articles (selected based on source, journal of publication, database, time frame, relevance language, geographical restrictions, and search descriptions) published in a broad range of internationally recognized journals, with special analytical focus placed on forty (40) recent articles. It provides fresh evidence that literature on overall private investment and that of foreign direct investment have been given paramount interest and attention, but domestic private investment has received relatively diminutive attention to date. This review will serve as a roadmap, indicating the current state, contributions made, and unsolved issues in the extant studies as well as situating works to enrich the literature. It, therefore, offers specific directions for researchers, academics, and practitioners.

Keywords:

• private investment
• foreign direct investment
• domestic private investment
• developing and emerging economies
• economic growth

PUBLIC INTEREST STATEMENT

Low private investment continues to be the major drawback to national development, especially for developing countries. This can be attributed to scarce capital (finance), skilled labour, plant and machinery; macroeconomic instability, poor managerial acumen, and social risk, which includes crime and endemic institutional corruption. Nonetheless, private investment has been described as the key driver of the economic prosperity of nations. Private investors may play key roles in job creation, wealth creation, and poverty reduction by providing funds needed for investment, ensuring their productive use, and monitoring to achieve desirable outcomes whilst adhering to the principle of inclusive development.

This study analysis the theoretical position as well as empirical evidence on foreign and domestic private investment in developing and emerging economies. The study provides new evidence that domestic investors’ participation in investment programs and activities remains very low because their initiatives and efforts are often obstructed, and they become discouraged. It evidently also shows that DPI must be completed with adequate investment from foreign sources.

Developing partners and governments of developing countries should therefore focus on prioritizing DPI, attracting adequate FDI, and keenly addressing the challenges associated with PSI, which were identified and emphasized in the study.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Josephine Ofosu-Mensah Ababio

Josephine Ofosu-Mensah Ababio is a lecturer, a research fellow, and a consultant, and she is currently at the University of Professional Studies, Accra. She holds a PhD and an MPhil/MBA in Finance from the University of Ghana, an M.Ed. Administration in Higher Education from the University of Cape Coast, and a Bachelor’s degree in Accounting and Economics from the University of Ghana. She is a holder of Advanced and Ordinary level certificates. She also holds a Post-Graduate Diploma in Management from IPMA (UK), a Securities Industry Course from the Ghana Stock Exchange, and a Final Diploma in Professional Administration from CIMC, Ghana.

She is a member of the Chartered Institute of Professional Administrators and the International Professional Managers Association (IPMA), UK. She has taught, supervised, examined, and mentored both undergraduate and post-graduate students for over a decade. She also has over a decade of industry and administrative work experience and expertise in trans-disciplinary projects. She is an investment and strategic financial management consultant, and has consulted on personal and institutional financial capacity building. She serves on corporate boards and on some university committees.

She has published in peer-reviewed finance, economics, and development-related journals. She serves as a reviewer for reputable international journals, including Cogent Economics and Finance, and has made several presentations at local and international conferences. Her research interests span investment and portfolio management, financial inclusion, banks and capital markets development, institutional quality, financial innovations for inclusive finance, Covid19-development finance, and these areas ultimately connect to the attainment of the principle of inclusive development.