Governance and Growth

The paper surveys the literature on the importance of geography and foreign direct investment against old and new development and mainstream theories. It finds that both play a significant and favourable role, although through different mechanisms than postulated earlier. The importances of the quality of the institutional framework as well as conditions for human capital accumulation are added to previous insights on the crucial role of openness and property rights. The paper aims at contributing to the bridge building between modern economic theory and rather empiricist, business management oriented studies on FDI and trade.*