Dynamic Linkages between Foreign Direct Investment Inflows, Economic Growth and Information and Communication Technology: Evidence from China and Malaysia

Abstract

Information and communication technology (ICT) is one of the key sectors promoting economic growth in the modern era of globalisation. Most economic activities, including international trade and foreign direct investment (FDI), largely depend on various modern ICT sources. This study examines the dynamic relationship between economic growth and FDI inflows toward ICT development in China and Malaysia from 1980 to 2017. The study applied an ARDL bound test to analyse the long-run and short-run relationship among the variables. The findings show that economic growth, FDI inflows and capital significantly influence China's ICT development in the long run. While human capital and labour were found insignificantly influence China’s ICT development. For Malaysia, only capital and human capital significantly influence ICT development in the long run. From the results, we emphasise that focusing on improving economic growth and FDI inflows will provide better ICT development in the country. From a policy perspective, policymakers should focus on improving economic growth and tailor their policies according to foreign investors' needs by improving the current regulatory performance to attract more foreign investors.