IntroductionDoes foreign direct investment (FDI) lead to development? This has been one of the central issues of discussions in most of the academic world. The involvement of FDI in developing economies is one of the signs of globalization. Considerable amounts of money have been transferred from developed countries to poorer ones. Foreign investment can be observed in the form of capital inflow and technology transfer. This article seeks to explore the nature of foreign direct investment and then discuss its effects on the recipient country. Foreign direct investment helps the host country develop its economy mainly through three factors: technological spillovers, linkage effects and competition effects. Therefore, some people believe that foreign direct investment is one of the important factors necessary for economic development. On the other hand, this paper discusses the importance of the host government in terms of appropriate policies. To obtain maximum benefit from the presence of multinational corporations (MNCs), the host country should have a certain level of general public education and must open its market to foreign investors, eliminating discriminatory policies. These and other related factors contribute to increasing the efficiency of FDI in developing the host economy. The paper also cites the development of South Korea as a case study to demonstrate whether foreign direct investment was necessary or not. Even though foreign direct investments have positive effects on the host economy, they are not crucial for the development of the host country since the government policies of the recipient state are the key factor leading to development. Nature of Foreign Direct Investment To have a better understanding of Foreign Direct Investment and its effect on the economic growth of the host country, this paper provides basic information on the determinants and types of...... half of the paper.... .. to be evaluated specifically to understand the efficiency of foreign investments.Works Cited1. José De Gregorio, “The role of foreign direct investment and natural resources in economic development”, Working Papers of the Central Bank of Chile, n. 196, 2003, http://www.bcentral.cl/estudios/documentos-trabajo/pdf/ dtbc196.pdf2. Kjetil Bjorvatn, Hans Jarle Kind and Hildegunn Kyvik Nordås, “The Role of Foreign Direct Investment in Economic Development,” Nordic Journal of Political Economy, vol. 28, 2002, p. 109-126, http://www.nopecjournal.org/NOPEC_2002_a08.pdf3. “Foreign direct investment for development”, OECD PUBLICATIONS, n. 81839, 2002, http://www.oecd.org/investment/investmentfordevelopment/1959815.pdf4. Laura Alfaro, “Foreign Direct Investment and Growth: Does the Sector Matter?”, Harvard Business School, April 2003, http://www.grips.ac.jp/teacher/oono/hp/docu01/paper14.pdf