Investigating the Determinants of Macroeconomic Factors on Outward FDI of Vietnam: The Gravity Model Approach

Abstract

Objective: The main purpose of this paper is to investigate the motivations of Vietnam’s outward FDI. Theoretical framework: We extend the gravity model proposed by by Tinbergen (1962) and developed by Ryan W. Tang et. al (2022); Correa da Cunha et. al (2022), Hui-Ching Hsieh et. al (2019) to evaluate the influence of macroeconomic factors of Vietnam and the host countries on the volume of Vietnam’s OFDI flow. Method: This paper intends to analyze the motivations of outward FDI pattern of Vietnam using the gravity theory and panel data of 15 main OFDI host economies during a 2007-2021 period. Results and discussion: The regression results confirm that the size of the economy, social index, common borderline and level of economic integration have positive influence on OFDI flows of Vietnam. Meanwhile, geographical distance has negative effect on OFDI flows Implications: As practical policy recommendations, it is suggested to implement measures aimed at enhancing trade relations and to introduce a new strategy regarding the policy for Foreign Direct Investment (FDI) in neighboring regions. Originality: To the best of author’s knowledge, there has not been any in-depth academic study focusing on the Vietnam’s outward FDI. In addition, robustness checks have been conducted to ensure the validation of empirical findings.