The economic effects of foreign direct investment at firm level: evidence from enterprises survey data

Abstract

ABSTRACTThis article aims to analyse the effect of foreign direct investment (FDI), with a focus on foreign ownership of firms, on the growth of output in South Asian firms by using enterprises surveys data for different periods. Using the Cobb–Douglas production function, we employed the econometric model to analyse the relationship between the firm-level characteristics and the output of firms. Furthermore, we estimated the moving averages of FDI inflows and GDP and their trends over the periods. Empirical results demonstrated the significance of inputs, specifically the FDI, employment growth and labour productivity in the context of many selected countries. The moving average results showed that FDI and GDP in major South Asian countries have been reduced after global financial crises of 2008. It can be concluded that the FDI, employment growth and labour productivity are the major contributing factors to the growth of output in the South Asian countries. Thus, this study has insight for the foreign investors and policymakers for the South Asian region.