Developing Host Countries Research Articles

Study on the Impact of Host Country ICT Development Level on China's OFDI Efficiency

The connotation of ownership advantages driving Chinese OFDI in the context of the IT revolution has changed significantly, and the level of ICT development in host countries may become a new type of locational advantage to attract foreign investment. In this paper, we investigate the impact of host country ICT advantage on Chinese OFDI and measure the efficiency of Chinese investment in 108 host countries from 2006 to 2015 with the help of the time-varying stochastic frontier gravity model, and empirically test the factors affecting investment efficiency, focusing on the impact of host country ICT development level on Chinese OFDI efficiency. It is found that overall the level of ICT development in host countries promotes the efficiency of Chinese OFDI; after distinguishing the sample into developed and developing countries, the level of ICT development in host countries has a differential impact effect on the efficiency of Chinese OFDI. This study helps us to better understand the relationship between Chinese OFDI and the ICT development level of host countries, and it has important insights for constructing new advantages in outward investment cooperation and improving the efficiency of outward FDI.

The effectiveness of bilateral investment treaties in attracting foreign direct investment: The case of Serbia

Over the past several decades there has been increasing competition among countries to attract foreign direct investment, which is often hypothesised to positively affect the development of host countries. Bilateral investment treaties are one of the policy instruments the host countries often use as a means to encourage foreign direct investment inflows. In this study, we aim to explore the effectiveness of bilateral investment treaties in achieving these goals in the case of Serbia. Using the panel data on Serbia and its 198 partner economies observed in the period 2010-2019, we estimate a gravity model of foreign direct investment inflows by applying the Poisson pseudo-maximum likelihood method. We found that ratified bilateral investment treaties have a statistically significant positive effect on foreign direct investment inflows in Serbia. Furthermore, the quality of the treaties was found to positively affect the inflows, whereby the anti-discriminatory provisions seem to be the most important. The results imply that Serbia could attract more foreign direct investment by concluding new bilateral investment treaties and improving the quality of the existing ones.

China’s Outward Foreign Direct Investment and Bilateral Trade Potential: A Theoretical and Empirical Study

As a large developing country, China’s outward foreign direct investment (OFDI) and its relationship to trade have always been subjects of extensive scrutiny in academic circles. With the continuous advancement of the “Belt and Road” initiative (BRI), the pace of overseas expansion by Chinese firms has accelerated. This paper theoretically constructs a firm heterogeneity model of China’s OFDI and bilateral trade, and conducts research based on panel data of China’s OFDI in countries along the BRI from 2003 to 2019. The results show that China’s OFDI can substantially enhance the potential for bilateral trade, and this conclusion remains robust after overcoming endogeneity and economic fluctuations. In a heterogeneity test, China’s OFDI in countries along the “Land Silk Road” is shown to have a greater effect on trade potential than in countries along the “Maritime Silk Road.” In the controlled test, China’s OFDI to BRI countries has a greater role in upgrading trade potential than investment in other trading powerhouses. China’s OFDI can promote the economic development of host countries along the BRI by strengthening the potential for bilateral trade. The results of this study are not only conducive to the “going global” of Chinese enterprises but also of practical significance for host countries to achieve high-quality economic development.

Relative Profitability of Multinational Enterprises in a Developing Host Country: The Sri Lankan Experience

Empirical evidence on the profitability of multinational enterprises vis-a-vis local finns in developing countries appears to be sparse and contradictory. This paper attempts to shed some light on this aspect through an analysis of the balance sheet data of a sample of manufacturing finns in Sri Lanka. The analysis does not support the generally-held view that multinational enterprises are more profitable than their local counterparts. It suggests that profitability cannot be explained by either origin (MNF/local finn) or sector, or age.

Employer Attractiveness of EMNEs: The Role of CSR in Overcoming Country-of-Origin Image Constraints in Developed Host Countries

Attracting a qualified workforce is a challenge for all companies but in particular for foreign subsidiaries of emerging market MNEs (EMNEs) in developed countries due to their double disadvantages of liability of foreignness plus liability of emergingness. Based on signaling theory, this study investigates whether corporate social responsibility (CSR) contributes to overcoming these liabilities. A web-based experiment with realistic recruitment webpages, involving 490 potential applicants from Germany, Switzerland and Austria, reveals that potential applicants in developed host countries have lower job-pursuit intention to EMNEs than to developed market MNEs, but that good CSR helps mitigate this negative effect. Nonetheless, we find that applicants are not intensively searching for CSR information on a recruitment webpage, constituting an impediment in EMNEs’ attempts to reap maximum benefits from their CSR engagement.

Contribution of China’s OFDI to Economic Growth of Developed Host Countries and Its Mechanism

Previous studies have shown that pathwise outward foreign direct investment can promote the long-term economic growth of developed economies and some developing countries with sufficient technology, human capital, and financial efficiency. However, the contribution of inverse outward foreign direct investment from developing countries, especially China, on the economic growth of developed economies has not yet been demonstrated. Based on the endogenous growth theory, this article uses panel data of China’s inverse outward foreign direct investment and economic growth indicators of 26 Organization for Economic Co-operation and Development countries from 2003 to 2017 to empirically study the contribution of China’s inverse outward foreign direct investment to the economic growth of developed economies and its mechanism, and furthermore to study the mediation effect of research and development capital and technological advances in the contribution. The empirical results show that China’s inverse outward foreign direct investment has a significant contribution to the economic growth of developed host countries, with a contribution rate of 3.01%. The contribution rate of the mediating effect is 24.3% when only considering technological advances and 54.34% when considering the multiple mediators of research and development capital and technological advances.

The Relationships Between National Intellectual Capital and Foreign Direct Investment

Foreign direct investment (FDI) has a significant influence on economic development, productivity and competitiveness in host countries. Policymakers are eager to attract FDI. With the importance of the knowledge economy, intellectual capital becomes a critical determinant of FDI location choice. Thus, the study tries to understand the relationships between national intellectual capital (NIC) and FDI in host countries and to compare the differences between developed countries and developing countries. The study hypothesizes that each component of NIC (human capital, market capital, process capital, renewal capital and financial capital) is positively related to FDI. Moreover, in developed countries, human capital and renewal capital has more influence on FDI while in developing countries, market capital and process capital have more influence on FDI.
 The study uses data from United Nations Conference on Trade and Development (UNCTAD) and Taiwan Intellectual Capital Research Center (TICRC). Because of data availability, the sample needs to be both included in the database of UNCTAD and TICRC during 2001 to 2018. The final sample consists of 59 countries which extends over the five continents. The study proceeds by using panel data, pooling 56 countries for the period from 2001 to 2019 after the Hausman test to determine whether there are fixed effects or random effects. A generalized least square (GLS) model is used to test the hypotheses with country-year data for FDI analysis.
 The results confirm that each dimension of NIC is positively related to inward FDI, indicating to the importance of NIC to attract inward FDI. In addition, national market capital, national process capital and national renewal capital have more influence on inward FDI in developing countries than in developed countries. Conclusions and practical suggestions are also provided.

China’s Evolving Diaspora Engagement Policy: Transnational Linkages And Stakeholder Perceptions

China’s profound demographic and socioeconomic transitions over the last four decades have led to significant changes in its diaspora: increased numbers, different destinations, and diversified reasons for emigration. The national diaspora policy has undergone many shifts since China’s momentous economic reforms and opening to the world in 1978; but policy now converges on a multifaceted and intrinsically transnational system of engagement in the service of soft power. Studies have so far stressed domestic interests, drawing insights primarily from policy documents; but this article seeks to broaden the perspective, using a transnationally oriented framework to assist investigation of factors that range beyond the domestic. Using in-depth interviews with a variety of key informants and stakeholders, we systematically analyze features in four core policy dimensions that incorporate both international and domestic dynamics: diaspora institutions, dual citizenship, talent recruitment, and soft power. Finally, we explore implications for development (economic, sociocultural, educational) in both China and host countries. We draw the conclusion that China’s diaspora policy is shaped by a constellation of transnational factors—such as changing global and regional power structures, and competition in talent-recruiting and talent-retaining in the new technological era. China now deploys multi-scale linkages across several dimensions, expanding from economic to sociocultural and political spheres, to engage its diaspora effectively. Finally, these policy developments not only shape China’s internal development but also influence global sentiment, bringing new dynamics to bear global power relations.

Formal vs. Informal Institutional Distances and the Competitive Advantage of Foreign Subsidiaries in Latin America

By focusing on the tacit and explicit characteristics of informal and formal institutional distances, this study investigates the competitive advantage of foreign subsidiary firms from developed countries and emerging markets operating in Latin America. Following recent research on distances in international management, this study measured the size and direction of distances and computed formal institutional distances based on the world governance indicators from the World Bank, whereas informal institutional distances are calculated using the four original dimensions of Hofstede. Considering that culture is tacit, whereas formal institutions are explicit, it is argued that these differences affect the ability to convert experience dealing with cultural and formal institutional conditions in the home country into firm specific advantages (FSAs) in a foreign host country. These assumptions are tested quantitatively using data from the Orbis database, a sample that includes over 4200 firm-year observations covering 10 of the largest economies in Latin America. In a departure from previous studies investigating the implications of FID direction, it is shown that the effects in specific directions are different for foreign subsidiaries from developed countries and from emerging markets. The results reveal that emerging market firms are at an advantage when operating in less developed host countries, whereas foreign subsidiaries from developed countries can adjust more positively when operating in host countries with strong formal institutions. On the other hand, the effects of the different CD dimensions depend on the direction towards host countries with specific cultural profiles. These findings indicate that foreign subsidiaries from emerging markets have a clear advantage in dealing with institutional voids in Latin America (i.e., FID towards less developed host countries), whereas the effects of CD are the same for all firms. This suggests that the cultural profile of the host country is what really matters.

Organizational legitimacy of emerging multinational enterprises: An individual perspective

Drawing on the information processing perspective from psychology, the study builds and tests a conceptual model to explain how the country-of-origin image (COI) and media coverage are associated with the organizational legitimacy of emerging multinational enterprises (EMNEs), and how the relationships are moderated by the education level of individuals in a developed host country. This study investigates the relationships by highlighting the multidimensional nature of these concepts. Our findings suggest that affective COI is positively associated with both pragmatic and sociopolitical legitimacy, economic COI is positively associated with pragmatic legitimacy, and political COI is positively associated with sociopolitical legitimacy. The findings also demonstrate that media influence legitimacy; however, the extent to which media influence legitimacy depends on individuals’ education levels. These findings advance our understanding of organizational legitimacy and its antecedents, providing new insights into strategies for building legitimacy in foreign countries.

Seeking Moral Legitimacy through Corporate Social Responsibility: Evidence from Chinese Manufacturing Multinationals

Recently, concerns have been raised as to how Chinese multinational companies (MNCs) can achieve organizational legitimacy and sustainable development in host countries, especially given China’s weak institutional environment. One strategic approach to establish and maintain legitimacy is by promoting corporate social responsibility (CSR). This study examined the relationship between Chinese manufacturing MNCs’ engagement in terms of CSR and gaining moral legitimacy in host countries, and whether the institutional distance between countries is an important moderating factor in this relationship. Using a hierarchical regression analysis and a bootstrapping method on data obtained from 303 questionnaires completed by a sample of Chinese manufacturing MNCs, this paper finds that CSR engagement at both aggregate and disaggregate levels (specifically, customer- and community-related CSR engagement) is likely to be an effective strategy for Chinese manufacturing MNCs’ subsidiaries to gain moral legitimacy in host countries. Furthermore, Chinese MNCs’ subsidiaries are more likely to gain moral legitimacy by means of engagement in customer- and government-related CSR when the institutional distance from China is greater. Overall, this paper contributes to our understanding of the gaining of moral legitimacy by Chinese manufacturing MNCs in host countries. The findings can support Chinese manufacturing MNCs in shaping the CSR strategy of their international businesses.

Export intensity of foreign subsidiaries of multinational enterprises

PurposeThe author contributes to the theory of the multinational enterprise by examining subsidiary-specific capability in financial management, defined as the stock of knowledge and capability to plan, manage, control and direct financial resources effectively and efficiently, and the perceptions of subsidiary managers of host country financial development as drivers of export intensity (the share of sales that are exported) of foreign subsidiaries of multinational enterprises (MNEs). The author theorizes that subsidiary-specific capability in financial management is conceptually a valuable subsidiary-specific advantage and it is as important as other traditional competitive advantages, such as research and development and marketing intensity. Perceptions of subsidiary managers of host country financial development are argued to be largely related to the characteristics of the host country-specific advantages.Design/methodology/approachThe author uses a survey dataset of the foreign subsidiaries of Western multinational enterprises (MNEs) together with other public data sources.FindingsThe author provides empirical evidence to support for these arguments that export intensity of MNE foreign subsidiaries depends on subsidiary-specific advantages and host country specific advantages.Originality/valueThe study broadens the understanding of the relationships between subsidiary-specific advantage in financial management, host country specific advantage, and export intensity of MNE foreign subsidiaries. In this way, the author makes an original contribution to new internalization theory by emphasizing the internal capability building of subsidiaries. The author discusses the implications of the findings for MNE foreign subsidiary managers, and policy makers because exporting is critical to the overall strategy of foreign subsidiaries, and it also contributes to the balance of trade and economic development of host countries where foreign subsidiaries operate.

The Effects of Institutions on Emerging Market Firms’ International Assignment Location Decisions

We investigate international assignment (IA) location decisions of emerging market firms as determined by the institutional contexts of their home and host countries. Using an institutional perspective, assignment patterns of the entire firm population in Slovenia to either other emerging or developed host countries in Europe are analysed. The findings show that both institutional quality and distance influence expatriation flows in firms from a low quality institutional context. These firms expatriate more to markets with high quality institutions and choose host countries with higher rather than smaller institutional distance for their IAs. We refine institutional theory with respect to host and home country institutional determinants of expatriation decisions by taking into consideration the particular features of emerging markets and their firms – separately and compared to developed markets and their firms.

When firms go international: deliberate or random?

PurposeThe net outward investment position (NOIP) indicator is insufficient for the purposes of understanding firms’ internationalization decision-making behaviour. The indicator does not allow for the withdrawal of insights into the structure of an economy and is a weak predictor of the degree of foreign direct investment. The purpose of this paper is to argue that a typology of firms aggregated according to intrinsic characteristics of those firms is a better predictor of the degree of internationalization of an economy than the NOIP.Design/methodology/approachThis paper uses a database of 2,133 firms located in Portugal with international operations, made available by AICEP, a government agency. This paper uses multiple correspondence and cluster analyses to build a typology of firms and obtains evidence of common characteristics of the constituent groups.FindingsThis paper identifies a typology of firms characterized by five types differentiated by firm age, length of internationalization process, sector of economic activity, legal status and psychological/cultural proximity. These variables suggest an evolutionary, iterative, self-learning approach to internationalization, which can be better explained by the combined use of the investment development path (IDP) framework, the Uppsala Evolutionary School and Vernon’s product life cycle theory. Additionally, this paper finds that the most striking differences between developed and developing host countries are in terms of the economic sector, legal status of the firm and belonging (or not) to an economic group.Originality/valueThis paper establishes a link between the IDP framework, the Uppsala Evolutionary School and Vernon’s product life cycle theory, using a categorization of firms made according to selected characteristics to understand the internationalization of firms.

Institutional Features Of The Russian Market Of Foreign Labour (In The Context Of Modern Challenges)

One of the consequences of the covid-19 pandemic was the contraction of the labor markets in developed host countries, and the sanctions pressure of the EU countries on Russia, in retaliation for her policy in Ukraine, radically changed the structure of the Russian labor market. The paper proposes a system for analyzing the signs and conditions that determine the institutional features of the use of foreign labor within the national labor market of Russia and developed European countries. The estimates made it possible to state a high frequency of competitive intersections of national personnel and migrants in the Russian labor market, which, together with preferences for cheap labor, is a hindrance to the innovative development of the economy. The development of a methodology for assessing the boundaries of the market of foreign labor will allow to make adjustments to the migration policy and technological development in Russia

Intra-Africa immigrant entrepreneurship for intra-African trade and economic development

Purpose: This paper aims to conceptualize intra-Africa immigrant entrepreneurship and provide evidence of its impact on intra-African trade and economic development. Immigrant entrepreneurship is often regarded as a key driver of international trade and economic development around the world; yet very little is known about intra-Africa immigrant entrepreneurship and its role in intra-African trade and economic development in Africa. Methodology: This paper applied a systematic review of literature methodology to provide insights into the role of intra-Africa immigrant entrepreneurship on trade and economic development of both host and home countries. Recommendations on how intra-Africa immigrant entrepreneurship can be used to promote intra-African trade and economic development are reviewed. Results: Policy guidelines that may increase the positive impact of immigrant entrepreneurs within the context of intra-African trade include immigration policies that attract high impact entrepreneurs, non-discriminatory support for high impact immigrant entrepreneurs as well as policies to strengthen the role of free trade agreements such as the African Continental Free Trade Area (AfCFTA). Conclusion: We conclude that African regional integration to promote intra-Africa immigrant entrepreneurship development is a conduit for Africa’s long-term and sustainable economic development. Evidence of the positive impact of intra-Africa immigrant entrepreneurship on intra-African trade and economic development is scant. At the same time, the notions of intra-Africa immigrant entrepreneurship are not well documented in the literature. This paper provides arguments for the promotion of intra-Africa immigrant entrepreneurship as a tool to increase intra-African trade and economic development.

No right to read: National regulatory restrictions on refugee rights to formal education in low- and middle-income host countries

What is the state of refugee rights to education in the national regulations of host countries? Some developing host countries have progressive legal frameworks that actively support formal schooling provision for refugee children, while other countries prohibit or severely limit education provision for refugees living within their borders. This can have implications for whether and how refugee children and youth access formal schooling. With just 68% of refugee children estimated to be enrolled in primary school, examining the barriers to schooling for refugees is vital. We present exploratory evidence on the question of refugee education regulatory variation with a novel dataset on low- and middle-income countries refugee education regulations. We then look closer at the cases of Uganda and Bangladesh, two countries that host some of the world's largest refugee populations, yet have completely different legal regimes in place for refugee education, with resulting variation in education programs and outcomes. Our findings support the need to improve access to education among refugees, and we conclude with recommendations for both policy and future research.

FDI and Intellectual Property Protection in China: A Game Theory Perspective

The large-scale spread of R&D activities by MNCs to investment host countries is a new phenomenon of globalization in the past ten years. For the host country, especially a developing host country such as China, how to promote the spillover effect of TNC research and development institutions on the host country and curb its crowding-out effect is a new topic. This paper analyzes the R&D strategy adopted by transnational corporations in China. We explain the relationship between the strength of intellectual property protection in China and the choice of the organization form of R&D activities by transnational corporations with game theory and proves the relationship between the two with data. Finally, policy implications are proposed for the trend of sole proprietorship of R&D activities of transnational corporations.

Islamic factor in the immigration process of the European Union

The article attempts to draw attention to the fact that the future of Western Europe depends to a certain extent on the timely resolution of immigration problems related to Muslims. This article aims to make a contribution to the research of the issue concerning the future of the Western Europe immigration process, which depends to a certain extent on the timely resolution of immigration problems related to Muslims. The point is that immigration flows, especially from the Muslim world, from a sporadic phenomenon have become a constant factor and raised questions about the development and implementation of measures to adapt Muslim immigrants to new working, living and cultural conditions in their new countries, search decisions aimed at reducing the pressure of the demographic factor on the economic development of host countries, cooperation in respect of human rights.

Foreign Direct Investment and Trade—Between Complementarity and Substitution. Evidence from European Union Countries

This aim of this work is to study the relationship between foreign direct investment (FDI) and trade. FDI is a driving force for economic growth for host countries. The positive effects of FDI are seen in many aspects of the economy. However, the implications of FDI on foreign trade are questionable. Therefore, this study uses a Granger causality technique to test whether the relationship between FDI and foreign trade is complementary or substitutive. The findings of this study indicate that this relationship appears to be complementary, and FDI investment does cause an increase in trade flow in the countries that are taken into consideration. This research aims to make a comparison between the relations of FDI flows of three groups of countries from the European Union (EU)—Romania and Bulgaria, the Visegrád Group and the Euro area—for the period of 2005 to 2019. However, the results indicate that this link between the variables is not yet found for the three group of countries, and further research is required in this aspect. This leads to the conclusion that the FDI impact on foreign trade of the host country depends on the type of investment and absorptive capacity of the receiver, the economic development of host and home countries, and not every type of FDI leads to more trade.