Abstract
This empirical study explores the impacts of technological capability on inward foreign direct investment (FDI) with the moderations of institutional quality. We extend the existing literature by contributing the dynamic links between technology trade and institutional quality by using the panel data of 35 Organization for Economic Cooperation and Development (OECD) countries between 2000 and 2015. Based on fixed-effects regression, our results show that there is a U-shape relationship between the net technological capability of a host country and inward FDI. In addition, the institutional quality of a host country, government size and regulation have positive moderations, whereas sound money accessibility and legal system and property protection have negative moderations on the main U-shape relationship. Our study contributes to the literature on the determinants of inward FDI in the context of technological capabilities and institutional quality.
Highlights
Foreign direct investment (FDI) is one of the main driving forces behind cross-border technology spillovers [1,2] and is preferred by developing countries due to its positive influence on economic development [3]
We focus our attention on how the various aspects of the institutional quality of a host country moderate this U-shaped relationship between inward FDI and the technological capability of a host country
To address the argument discussed above, we explore the determinants of inward FDI by exploring the dynamics between technological capability and institutional qualities of host countries
Summary
Foreign direct investment (FDI) is one of the main driving forces behind cross-border technology spillovers [1,2] and is preferred by developing countries due to its positive influence on economic development [3] In this sense, previous studies have focused on the determinants of FDI inflows to developing countries and have highlighted the importance of institutional quality in host countries in attracting FDI [2,3,4].
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