This is especially applicable for developing economies. During the 1990s, foreign direct investment was one of the major external sources of financing for most countries that were growing economically. It has also been noted that foreign direct investment has helped several countries when they faced economic hardship.
An example of this can be seen in some countries in the East Asian region.
It was observed during the 1997 Asian financial crisis that the amount of foreign direct investment made in these countries was held steady while other forms of cash inflows suffered major setbacks. Similar observations have also been made in Latin America in the 1980s and in Mexico in 1994-95.
For host countries, inward FDI has the potential for job creation and employment, which is often followed by higher wages.
Resource transfer, in terms of capital and technical knowledge, is also a key motivator that encourages inward FDI.