THE ESSENCE AND MODEL OF THE IMPACT OF FDI ON SOCIETY
Abstract
Objective. The article provides an in-depth analysis of scientific sources and contemporary research dedicated to examining the social impact of Foreign Direct Investment (FDI). By critically evaluating these studies, it was possible to identify a range of conceptual limitations that may lead to ambiguous results in empirical research. Results. To address these challenges, the article proposes a new conceptual framework that redefines the essence of the social impact of FDI as being intrinsically linked to changes in the level of satisfaction of human needs. This novel perspective suggests that the impact of FDI should be measured not only by traditional economic indicators but also by how it contributes to meeting the fundamental and evolving needs of the population in the host country. The application of the hypothesis regarding the recursive connection between the needs of society members and foreign investors, combined with the concept of the hierarchy of human needs, as developed by A. Maslow, has allowed the formulation of a structural and functional model of FDI's social impact. This model provides a comprehensive framework for understanding the multifaceted effects of FDI on society, considering both immediate economic benefits and long-term social changes. Additionally, a mathematical interpretation of the relationship between the identified categories, including the quantitative and qualitative characteristics of FDI, was presented. This mathematical model may serve as a base for analyzing how variations in foreign capital, the level of economic development, and the industry structure of the host country can influence the overall social impact of FDI. The proposed hypotheses based on this model suggest that the social effects of FDI are not uniform but depend on specific conditions within the host country, such as its economic maturity and sectoral composition. Further exploration of these hypotheses through empirical research based on the proposed model could significantly enhance our understanding of the various ways in which FDI contributes to social progress. It could also help identify the critical factors that determine the strength and nature of FDI's social impact in different economic and social contexts. By doing so, policymakers and investors could better tailor their strategies to maximize the positive outcomes of FDI for both the host country and the foreign entities involved. This deeper understanding would ultimately support more sustainable and inclusive economic growth, benefiting a wider range of stakeholders in the global economy.
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