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Globally, the improvement of deeper and more complex local and international financial markets as well as developments in technology and information transmission have contributed to improved economic and financial integration. To obtain most of the economic advantages, resulting from these processes, most states, especially the developed ones, have started reform agendas designed to develop the efficiency and the scope of their local financial systems and discard structural impediments that may otherwise avoid cross-border capital flows. Eventually, in recent periods, there has been an increase in the flows of both foreign direct investment (FDI) and portfolio investments. While some policy makers could remain skeptical about the long-term advantages resulting from inward portfolio investments, FDI by virtue of its longer-term disposition is regarded as more advantageous. Moreover, the FDI flows mostly fortify the point of view as positive economic advantages accomplished through higher levels of growth. Nonetheless, FDI within host states could benefit from rises in living standards and it is expected that the inflow of FDI would bring about economic growth as well. Furthermore, in theory, FDI has been proved to support economic growth by means of technology transfer and diffusion, spillover impacts, productivity gains as well as the introduction of the introduction of new processes, managerial capacities and know-how in host states. FDI is expected to play a significant role in modernizing the economy and instigating economic growth in host countries, especially in developing states. Additionally, FDI could constitute an international network which optimizes the flow of domestic merchandises across frontiers, constitutes cost savings as well as related scale and scope economies for business organizations (Batten, Vo, 2009; Wang, Wong, 2011; Iacovoiu, 2015).
FDI may play a significant role in enhancing the productivity of the host countries and maintain economic development. Nevertheless, technological innovation and knowledge are fundamental for the economic development and economic growth which may be fortified with FDI inflows. Moreover, the practice has proved that any sustainable economic improvement entails more than a receptive economy to technological inflows of inputs; so, in order to survive and flourish, business organizations of different sizes are supposed to distribute significant sources in view of acquiring high technology and knowledge. Therefore, the FDI inflows in a country could have the potential to enhance the quality of the current production factors and to improve numerous competitive advantages rested on specialized factors. With respect to host countries, the technological transfer by FDI shall generate positive impacts, such as, enhancing the workers’ knowledge and capacities, the dissemination of technological and managerial practices, reflecting upon the expenditures and the quality of products, the enhancement of the relations between international business organizations and the domestic institutions; prompting domestic firms to orient their efforts with respect to a technologies activity as to face the competition of growth. Henceforth, the quality of FDI received by a country is as significant as its quantity, since increased FDI does not always imply a proportional rise in economic development. Moreover, factors such as natural source endowments, population size, the degree of industrialization, the government policies implemented as well as economic and political structures impact on the inflow and efficiency of FDI (Iacovoiu, 2015; Batten, Vo, 2009).