Application of Multi-Criteria Decision-Making Model and GM (1,1) Theory for Evaluating Efficiency of FDI on Economic Growth: A Case Study in Developing Countries

Wang Wang,Le Le

doi:10.3390/su11082389

Abstract

Foreign direct investment (FDI) and corporate social responsibility (CSR) spending are one of the major factors in improving sustainable economic development of a country. Therefore, this study focuses on the multi criteria application of FDI and sustainability factors (CSR spending) in various developing countries to explore its impact and decision making for sustainable economic growth. The study uses a case study methodology whereby FDI, exchange rate, and CSR expenditure data from 20 countries were used to assess the efficiency in sustainable economic growth. Data were collected from the World Bank for 20 Asian and African developing countries during 2012–2017 and analyzed using GM (1,1), mean absolute percentage error (MAPE), Malmquist productivity index (MPI)-data envelopment analysis (DEA), and the slacks-based measure of efficiency (SBM) model. Correlation analysis is used to find the relationship for FDI, CSR, exchange rate, gross domestic product (GDP), and GDP per capita (GDPPC). The results of the Malmquist productivity index and the frontier effect clearly highlight that a few countries have witnessed a great improvement in terms of productivity and technological progression. Therefore, the decision makers must adopt the model of those countries with respect to sustainable development of the nation. This study helps developing nations as well as researchers to benchmark efficient countries and follow their strategies to develop a new one for utilizing FDI and CSR spending in sustainable economic development. The study also helps policy makers in multi criterion application of FDI and CSR for decision making in economic development.

Highlights

Foreign direct investment (FDI) provides capital, foreign exchange, technology, competition, and increases reach to the foreign market
Since the main aim of the study is to assess the efficiency of FDI and corporate social responsibility (CSR) spending on economic development of the developing countries, efficiency of FDI and CSR spending indicates the efficient increase or decrease of FDI and CSR spending on increased sustainable economic development shown by rise in gross domestic product (GDP) of the country
In order to evaluate the efficiency of FDI on the economic growth, the researcher provides the results of the data analysis in this chapter

Summary

Introduction

Foreign direct investment (FDI) provides capital, foreign exchange, technology, competition, and increases reach to the foreign market. It is considered as a very fruitful factor for the development of the economy [1]. Foreign corporations and investments provide technological benefits and additional direct capital inflow, which indicates that FDI plays a crucial part in modernizing host economies and promoting sustainable growth [4]. It is important that FDI have a positive and direct effect on the rate of GDP growth per capita [4,5]. FDI brings in development of the financial system, trade openness, and institutions for technological adoptions, which helps in development of GDP per capita growth rate. Apart from FDI, CSR (corporate social responsibility) is responsible for sustainable economic growth of a country [6]

Objectives

Methods

Results