The Determinants of Foreign Direct Investment (FDI) inflows to developing countries have been widely discussed over these last years, since FDI has become an important source of private external finance and new technology diffusion to these countries. Relying on the theoretical assumption that a multinational company will penetrate into a market based on economic considerations, the aim of this study is to contribute to the already existing literature by investigating the determinants of FDI into African and Asian emerging and developing countries, using OLS regression and fixed / random effects estimation. Compared with previous studies this paper will solely focus on African and Asian developing countries, 19 countries in total considered during the period 1997 to 2008.
Our findings show that generally the effect of exogenous variables on FDI is different from estimation to estimation. If we consider the entire panel, the total population of the recipient country, the government size, openness of the economy, human capital and surprisingly inflation appear to be the most important motives of FDI flows to Africa and Asia (fixed effects estimation), whereas GDP per capita looks to have had the most influential impact on FDI over 12 years time period (OLS).
Considering the two regions individually, we have found out from both fixed effect and OLS estimations that the government size and human capital availability are the most constant factors that influence FDI flows into Africa, whereas openness of the economy and political freedom will constantly promote FDI into Asia.
The difference between the two regions suggests that African decision markers should take the characteristics of the African region into account when secreting economic policies and avoid to dash into policies, which have been primary designed for other regions.
Finally the host country’s economy growth was found to be insignificant in all of our models. Therefore the GDP growth is definitively not a parameter of FDI. However the reverse hypothesis, which assumes that FDI will trigger economic growth, has been empirically proven.

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