Developing Host Countries Research Articles

Is the country’s preparedness for epidemics and pandemics an FDI location factor? An empirical analysis using panel data

Purpose This study aims to validate the hypothesis that a country’s preparedness for epidemics and pandemics, as measured by the GHS Index, significantly influences inward FDI inflows. By examining panel data from 2019 to 2021, the research seeks to elucidate the impact of heightened epidemic and pandemic preparedness on investment behavior, thereby highlighting the importance of health resilience and preparedness in attracting foreign investment and fostering economic growth and development. Design/methodology/approach The study uses panel data spanning 181 countries from 2019 to 2021 and uses logarithmic regression models to analyze the impact of a country’s preparedness for epidemics and pandemics, as measured by the Global Health Security (GHS) Index, on inward Foreign Direct Investment (FDI) inflows. Auxiliary variables including GDP, labor supply, openness rate, inflation rate and political stability are incorporated. Robust weighted least squares estimation techniques are used to account for potential heterogeneity and panel data characteristics. Findings The study reveals a consistent and statistically significant positive relationship between a country’s GHS score and inward FDI, indicating that destinations with robust health systems are more attractive to investors. Higher GHS scores correlate with reduced investment risk, improved business continuity during health crises and enhanced health-care infrastructure, leading to a healthier and more productive workforce. Research limitations/implications While the study provides valuable insights into the relationship between epidemic and pandemic preparedness and inward FDI inflows, several limitations exist. The analysis relies on cross-sectional data from a relatively short timeframe (2019–2021), limiting the ability to capture long-term effects. Additionally, the study focuses on the GHS Index as a measure of preparedness, overlooking other potential determinants of FDI attractiveness. Future research could explore a broader range of health security indicators and incorporate longer-term data to provide a more comprehensive understanding of the relationship. Originality/value This study contributes to the literature by examining the previously underexplored relationship between a country’s epidemic and pandemic preparedness, as measured by the GHS Index and inward FDI inflows. By using panel data analysis and robust econometric techniques, the research provides empirical evidence supporting the positive impact of robust health systems on FDI attractiveness. The findings underscore the importance of prioritizing public health initiatives and epidemic preparedness as integral components of attracting and retaining foreign investment, thereby fostering economic resilience and sustainable development in host countries.

Forced Migration and Violent Crime: Evidence from The Venezuelan Exodus to Brazil

Does increased exposure to forced migration affect violent crime rates in developing host countries? To answer this question, we exploit the unprecedented inflow of Venezuelans to Brazil. Contrary to fears propagated by the anti-immigration rhetoric, our two-stage least squares estimates reveal that the sudden influx of refugees did not affect violent crime in which natives were victimized. In fact, our results suggest that forced migration only increased violent crime involving Venezuelan victims. Victimization of migrants seems to have increased at a slower pace than their presence in the host country. Yet, it was concentrated among young males between the ages of 15 and 39 living in the border region of Brazil with Venezuela. Evaluating the causal impacts of forced migration in a developing context is crucial to providing governments and international agencies with rigorous evidence to support policy decisions. In the absence of the latter, public perception can play a key role as host populations may pressure authorities for anti-immigration policies based solely on perceptions. Moreover, violence hinders migration’s documented long-term benefits by imposing high economic and social costs.

The Impact of ‘Migration Potential’ on the Economic and Demographic Development of Donor and Recipient Countries

The phenomenon of global migration exerts a substantial impact on nations, organizations, and individuals, yet the focus of scholarly discourse on the potential of migrants has historically not paralleled the magnitude of this phenomenon. This study brings into focus the often-neglected dual nature of immigrant potential, impacting both countries that receive migrants (recipient countries) and those from which migrants originate (donor countries). Prior research within the Russian context predominantly examined the potential of compatriots in post-independence neighboring countries or the potential related to internal migration and the redistribution of human and labor resources regionally. Prevailing perspectives have largely been confined to examining the migration potential of specific socio-demographic groups within defined territories, often characterized by distinct ethnic features. This research illuminates the dual aspect of external migrant potential. It elucidates how migrants contribute significantly to the development of host countries, while donor countries also reap considerable benefits from the migratory capabilities and engagements of their citizens in foreign employment.The objective of this article is to augment theoretical paradigms in the study of "migration potential," conceptualizing it as an integrative system that combines quantitative and qualitative attributes of a highly mobile and motivated populace. The paper seeks to delineate the conceptual framework of migration potential, establish its structural composition, and elucidate the mechanisms and factors through which migrant potential influences the economic and demographic progress of both recipient and donor nations.Findings: The study delineates the constituent components of the functional sub-potentials (subcomponents) within the broader construct of "migration potential," synthesizing these through a meticulous examination of extant Russian and international academic literature. Migration potential is approached as a variable that is both fluid and subject to modification. The research critically analyzes the multifaceted impacts – both advantageous and adverse – of migration on diverse sectors of life in donor and recipient countries. A case in point is the correlation between the educational potential and the intellectual prowess of highly skilled migrants, which significantly contributes to innovation within the host regions. Conversely, a deficiency in the integration potential of external migrants may precipitate xenophobic tendencies among native populations. From the perspective of donor countries, the influx of remittances stands out as a pivotal and transformative element within the broader context of global migration.

Parent firm reputational risk and TMT gender diversity of foreign subsidiaries

In this study, we fill an important gap in the literature by examining the impact of parent firms’ reputational risk on subsidiary top management team gender diversity (TMTGD). Drawing on signalling theory and framing TMTGD as a nonmarket social and political strategy, we hypothesize that foreign subsidiaries use gender diversity in their upper echelons in response to increased parent firms’ reputational risk to signal a commitment to gender equality causes and socio-economic development in host countries. Analyzing data from publicly traded Chinese foreign subsidiaries, we found support for our hypothesis. We also found that the impact of parent reputational risk on subsidiary TMTGD is contingent on subsidiary primary activity, host-country institutional gender parity, and home-host country institutional distance. This study makes important contributions to the international business corpus, especially to reputational risk and nonmarket strategy literature domains.

Does internationalization improve environmental disclosure willingness and quality? The moderating role of green investors.

Environmental issues have gradually become a key concern for society. The public has been paying increasing attention to corporate environmental disclosure and performance. With the "go global" trend, more and more enterprises are looking to overseas markets for new technologies and resources. Multinational enterprises (MNEs) are facing more challenges than domestic enterprises. To remain competitive and sustainable, enterprises from developing countries need to gain a foothold in developed countries. We explore how MNEs' internationalization impacts environmental disclosure, specifically focusing on the role of green investors as stakeholders. We draw evidence from Chinese-listed MNEs, with a total of 4,709 panel data observations. For the main analysis, we use a fixed effect model. The findings suggest that a higher level of internationalization can improve both the willingness and quality of environmental disclosure for MNEs, and this relationship is further strengthened by green investors. A heterogeneity analysis reveals that the positive effect of internationalization on environmental disclosure is mainly present in state-owned enterprises (SOEs) and developed host countries. We find that external pressure from host countries motivates MNEs to increase environmental disclosure willingness and quality. This study provides valuable insights for MNEs from emerging economies on how to achieve legitimacy and a positive reputation in overseas markets through environmental disclosure strategies. This study proposes the importance of green investors on environmental disclosure issues from a stakeholder perspective and provides new theoretical insights for environmental policy reform in developing countries such as China.

Drivers of bilateral FDI inflows in North Africa region: a gravity model approach

Purpose- This paper aims to explore the main determinants of bilateral foreign direct investment (FDI) and investigate the relationship between bilateral trade and FDI inflows in five North African countries with 25 investment partners. Methodology- The study employs a gravity model and pooled time-series-cross-sectional regression method, utilizing a 10-year average over the period 2001-2010, the significance of this research lies in its contribution to the existing literature as the first study to analyze the factors influencing bilateral FDI inflows between North African countries and their primary investing partners. Findings- The results indicate that bilateral trade, economic size, financial development, and common language of host countries are key drivers of bilateral FDI inflows between North African countries and other nations. Furthermore, the presence of a common language between host and home countries has a significant and positive impact on bilateral FDI. However, the distance between host and home countries has a negative effect on FDI. Conclusion- This paper concludes that foreign direct investment (FDI) between North Africa and other nations was influenced positively by the economic sizes of both the home and host countries while being negatively affected by the physical distance between them. Additionally, the results demonstrate that the presence of a common language and bilateral trade play crucial roles, with their effects being highly positive and significant. This suggests that FDI flows tend to be greater between North African countries and those with whom they already have substantial bilateral trade transactions. Furthermore, the study concludes that France, the United Arab Emirates, Spain, and Kuwait are the most significant investing countries in the North African region in terms of FDI, surpassing other nations. Keywords: Bilateral FDI inflows, bilateral trade, gravity model, North Africa, geographical and culture factors. JEL Codes: F14, F21, F40, F30, F15

The relative pay for foreign work: A novel evidence from home and host countries

The literature has robustly documented a negative migrant-native wage gap in developed economies. Yet empirical evidence of pay differences has been elusive for developing countries. We approach this question by leveraging internationally harmonised microdata with 1.5 million individuals from 6 transition and developing countries and 15 OECD economies spanning from 1995 to 2016 and employ counterfactual decomposition techniques which allow us to control for individual-productivity and job-specific characteristics, and explain up to 74% of the observed immigrant-native wage gap. The Blinder-Oaxaca baseline results indicate that, vis-à-vis comparable workers born in developed economies, the pay for workers born in transition and developing economies is discounted both in their home country labour markets and – if migrating – also in developed host country labour markets. However, the unexplained native-to-migrant wage gap remains sizeable in most countries even after controlling for productivity differentials (26% and more). Cross-country correlation analyses provide a direct empirical evidence of the link between variation in unobserved job characteristics and skills among foreign-born and native-born workers and wage gap, while the labour market institutions and especially the labour market discrimination environment are of a second-order importance.

Refugee entrepreneurship motivations in Sweden and Germany: a comparative case study

Refugee entrepreneurs can make a significant contribution to sustainable growth and development in host countries. However, comprehensive comparative studies of refugee entrepreneurial motivations are scarce, particularly in the absence of a theoretical framework on entrepreneurship motivation that is suitable for such contexts. This is a research topic that is increasingly of interest to scholars and policymakers working with refugee workforce integration, particularly in light of forecasted increases in global forced displacement over the next years. This paper tests and extends newly constructed entrepreneurship motivation measures, comparing person-related factors and the perceptions of environmental-related factors for Syrian refugee entrepreneurs in Sweden and Germany. The results indicate that their motivations differ between the two countries with respect to market conditions, the educational environment, dissatisfaction, and know-how. However, refugee entrepreneurs in both countries have similar levels of entrepreneurial ambition and attitude and are motivated by similar perceptions of social environments and cultural norms. This paper identifies how entrepreneurship motivation differences could be considered by governments to better shape and inform host countries’ programs and policies to improve refugee entrepreneurship and subsequent integration.

Older People’s Contribution to Development Through Carework: The Role of Childcare by Grandparents in Migration and Development

This article applies a generational lens to understanding the role of older people in development, focusing primarily on older parents who stay in areas of origin while their adult children emigrate. An emerging body of literature from around the world demonstrates that older parents frequently provide childcare for their migrant family members, mainly in the country of origin, and sometimes through migrating themselves. This article goes further. It makes the conceptual argument that this carework should be regarded as development work. Drawing on research into Albanian families, located in Albania and Greece, the article asks how does carework by older people contribute to development and what are the relations of power around this? The analysis shows that grandparents provide significant support particularly for childcare but also for social reproduction and critically for building and maintaining productive assets and safety nets for migrants in their home country. In short, grandparent carers are the lynchpins in complex intergenerational strategies of migration and livelihood development. The analysis contributes to the literature on migration and development by bringing older people from the margins to the centre of these debates. Older people’s childcare, together with other productive and reproductive activities that they undertake for migrant children in countries of origin, is central to invisibilized ‘economies of care’ that underpin migration’s contribution to development. Moreover, this carework by older people contributes to development in home and host countries, thus bridging the Global South–Global North divide. Finally, older people’s carework is gendered, with older women doing the vast majority. Taken together, these insights disrupt two dominant (economistic and Eurocentric) narratives that: (a) development in migration contexts only happens in the Global South and (b) the most significant drivers of this development are migrants’ social and financial remittances from the Global North.

Does Institutional Quality Matter for Foreign Direct Investment and Human Development?

This study examines the relationship between foreign direct investment (FDI), institutional quality and human development) in host countries from 2002 to 2019, using the Human Development Index [HDI] as the measure of human development. This study utilized a panel dataset of 143 countries, including both developed and developing economies, over a 17-year period. Additionally, the study employed a GMM (generalized method of moments) estimator to address unobservable heterogeneity and simultaneity. This study reveals a significant positive relationship between FDI and human development, with a stronger effect observed in developing countries compared to in developed countries. Notably, the impact of FDI-HDI nexus is larger in countries with moderately high-quality institutions, irrespective of their income level. Furthermore, good governance plays a crucial role in enhancing human development, as developing economies with high governance quality experience a greater impact of FDI on HDI compared to other countries. The findings of this study suggest that attracting FDI can be beneficial for enhancing the HDI, especially in developing countries. Additionally, the study highlights governance as a moderating factor in the relationship between FDI and HDI. Improving governance quality can enhance the positive impact of FDI on human development in host countries, especially in developing countries.

The carbon footprint of Chinese multinationals’ foreign affiliates

As China’s outwards foreign direct investment (OFDI) has grown dramatically, the environmental impact of the production activities of Chinese multinational enterprises (MNEs) has received substantial attention. Using a multiregional input-output model reflecting firm heterogeneity, this study measures the carbon footprint (CF) and value-added (VA) of Chinese MNEs’ foreign affiliates to quantify the trade-off between economic benefits and environmental damage. The results show that Chinese MNEs’ affiliates’ CF is not large but grows quickly, mainly driven by investment and scale effects. The CF of foreign affiliates is primarily distributed in resource-intensive countries. The economic-environmental effect of Chinese MNEs’ foreign affiliates is heterogeneous across countries and sectors. The best performance is found in the manufacturing sectors of most developing countries, with the worst performance in the service sectors of developed countries. Chinese MNEs’ affiliates can transfer clean technology from developed host countries to China through reverse technology spillovers.

The Interplay of Formal Institutional and Cultural Distances and the Financial Performance of Foreign Subsidiaries in Latin America

We investigate how formal institutional distance (FID) moderates the cultural distance (CD) and financial performance relationships of foreign subsidiaries of firms. Following recent research, we estimate the asymmetric effects of CD by considering its size and direction towards host countries on the opposite poles of each cultural dimension’s scale. We propose that a limited understanding of the formal institutions in the host country, as measured by the magnitude and direction of the FID, can positively moderate the CD–performance relationship. This is mainly because foreign subsidiary firms may be more reliant on their capacity to navigate the less formal (and more implicit) aspects of the host country’s institutional environment, such as their ability to cope with the CD. We use foreign subsidiary data from the Orbis database, which includes 22 developed and 22 developing home countries and over 1400 foreign subsidiaries operating in 10 of Latin America’s largest economies (host countries) from 2012 to 2015 (a period of 3 years). Findings confirm the asymmetric effects of CD; however, by considering the direction of FID, our findings reveal that the more FID is directed towards host countries that are less developed, the more significant the effects of CD on financial performance. These findings contribute to our knowledge of how formal and informal institutional distances interact by showing that the greater the FID towards less developed host countries, the more pronounced the effects of CD.

Inimitable Elements Impacting Student Mobility Among Developing Countries and Developed Countries

Purpose: The current investigation examines the uniqueness of the determinants that drives students flow to developing countries to study abroad. The study also compares these determinants with the factors influencing student mobility toward the developed world. The theoretical framework: Various theories and models such as new migration theory, liberalisation & competition, push and pull factor model are taken as theoretical backdrop and for econometric estimation augmented models are developed by selecting relevant variables. Methodology: Data is collected on variables from distinct sources, and panel data is prepared. Static and dynamic panel estimation is used adopting fixed effects, random effects, conditional fixed effects and Poisson random effects models. Findings: It is concluded that return on investment, the value of degree, cost of living, and skill orientation make developing a preferred destination. In contrast, factors like seeking employment and a high-income level make them preferred over developing countries. Economic forces drive student mobility globally and within developing countries. It includes opportunities to earn income, employment in host countries (in case of developed host countries) and home countries (in case of developing countries), and cost of living. Research Policy Implications: The study postulates policy implications in terms of attracting foreign students by understanding the dynamics of their choices, as the factors that influence the decisions to study abroad are distinct when it comes to choose a developed nation as a destination or a developing nation as a destination. Originality/Value: The study adds to the existing body of knowledge new dimensions on inward student mobility especially towards developing countries. This helps the educators and policymakers to understand the dynamics in more detail and device appropriate strategies to attract foreign students to domestic shores.

Do international paid remittances hinder the financial development of GCC host countries?

PurposeThe present study aims to compare the effect of international paid remittances on financial development in three Gulf Cooperation Council (GCC) countries from 1985 to 2020.Design/methodology/approachThe study applied the bound cointegration technique and the autoregressive distributed lag (ARDL) method for long- and short-run estimations as well as diagnostic tests to increase robustness.FindingsThe ARDL long-run results showed that international paid remittances had a significant negative effect on financial development in Oman and Saudi Arabia but an insignificant negative effect in Bahrain. The error correction model for the short run of the ARDL slowdown model showed that international paid remittances had a significant positive effect on financial development in Oman, Bahrain, and Saudi Arabia.Originality/valueFew studies have examined remittance outflows from GCC countries, which are enriched by oil wealth and located in one of the most stable geographical areas in the world. The findings from this study can help policymakers understand how to enable remittances and investments in order to establish regulations that will preserve remittance inflows and meet target services.

Can China’s belt and road investments improve the comprehensive international competitiveness of host countries?

ABSTRACT Since China proposed the Belt and Road Initiative in 2013, the effect of driving economic development in host countries has intensified. This study examines the effect and spatial mechanisms of China’s Belt and Road investment on the comprehensive international competitiveness of 48 countries along the Belt and Road route in three dimensions: the basic requirements, efficiency enhancers, and economic freedom. The results revealed significant contributions and spatial spillover effects, whose spatial mechanisms can be implemented by upgrading the level of infrastructure development, optimizing the market environment, and enhancing the innovation capability. Therefore, it can be said that China’s Belt and Road investment can promote the development of the host country’s comprehensive international competitiveness from multiple perspectives. Moreover, research indicates that the infrastructure distance between the host country and China provides a broad space for Chinese investment, under whose effect Chinese investment contributes significantly and exhibits a positive spatial spillover effect, while market distance and innovation distance have the opposite effects.

Financial Deepening, OFDI and Economic Growth: Based on the Perspectives of Both China and Host Countries

Based on the perspectives of both China (home country) and host countries (economies), a financial deepening indicator system and an economic growth indicator system are constructed, the mutual influence mechanism between financial deepening (FD), outward foreign direct investment flows (OFDI) and economic growth (EG) are studied. Firstly, from the perspective of China, based on Error Correction Model (ECM) and Vector Error Correction Model (VECM), the conclusions received are as follows. (i) China's financial deepening and OFDI have a long-run positive impact on China's economic growth. (ii) Further analysis also confirms that reforms related to financial deepening have positive policy effects on promoting OFDI in China. Secondly, from the perspective of the interaction between China and host countries (economies), based on Time-varying Spatial Durbin Model (TVSDM), the conclusions received are as follows. (i) In general, China's OFDI to host countries plays a positive intermediary role in the process of financial deepening for economic development in host countries. (ii) Three aspects (FD, OFDI, EG) have different degrees of spatial autocorrelation and spatial spillover effects on each other, which are positive in general. (iii) Further analysis also found heterogeneity in the above conclusions for high-income and low-income host countries individually. In a word, a comprehensive analysis framework of three aspects (financial deepening, OFDI and economic growth) is finally constructed, which has important implications for overseas investments and financial support to the real economy.

Empirical Research on The Impact of China’s Overseas Economic and Trade Cooperation Zones on the Development of Host Countries in the Global Value Chain

China’s Overseas Economic and Trade Cooperation Zones (COCZs) have become representative platforms of regional cooperation. However, there are few empirical studies exploring their economic and trade effects on host countries. In this study, we comprehensively investigate the impact of COCZs on the host country’s GVC participation and positions by constructing a difference-in-difference specification on the industrial level. The main conclusions are: Firstly, COCZs are prominent in promoting the participation in GVCs for host countries while restricting the rise of their positions in GVCs to some extent. The reason lies within the fact that the impact of COCZs on the GVC positions is affected by the host country’s factor endowment, innovation level, and business environment. Secondly, for developing countries, the construction of COCZs has a more significant positive effect on their GVC participation. For developed countries, the construction of COCZs can significantly promote their GVC positions. Thirdly, the construction of COCZs has a greater impact on the GVC participation and positions for countries with smaller difference in industrial structure with China, the leading industries in COCZs, and the advantageous industries of host countries.

Inward FDI and the quality of domestic institutions: A cross-country panel VAR analysis

Domestic institutions are recognized as important factors in attracting foreign direct investment (FDI), and spurring economic development in host countries. There is increasing evidence, however, that FDI may in turn affect and shape domestic institutions, and it is generally difficult to disentangle these two effects. The present paper aims to shed light on this issue using extensive data on the quality of institutions and on inward FDI in 102 countries over a period of 25 years. We distinguish between different types of institution, FDI, and country, and we adopt a panel vector autoregression (VAR) approach to identify the direction of causality between the two variables. Our findings suggest that the quality of institutions matters for attracting FDI, but also that higher inflows of FDI have a significant short-term impact on the institutional quality of recipient economies. We also find that such a relationship varies with the type of FDI considered, and differs between transition and developing economies.

R&D grants and R&D tax credits to foreign-owned subsidiaries: Does supporting multinational enterprises’ R&D pay off in terms of firm performance improvements for the host economy?

The subsidiaries of foreign-owned multinational firms make significant contributions to national Research and Development (R&D) in many host countries. Policymakers in host countries often support subsidiaries’ R&D efforts, through R&D grants and R&D tax credits. A key objective of this funding is to leverage R&D-driven firm performance benefits for the host economy. However, the subsidiary's parent firm may decide not to commercially exploit the results from host country-funded R&D projects, in the host country. Therefore, supporting subsidiaries’ R&D presents a unique risk, that significant amounts of scarce public R&D funding may translate into little, or no firm performance payoffs for the host economy. To address this issue, we construct a unique panel dataset, containing 24,404 observations of firms in Ireland over a 10-year period. Using this rich data, we first evaluate the impact of R&D grants and R&D tax credits on subsidiaries’ R&D. We then examine the link between policy-induced R&D from each policy instrument, and subsidiaries’ firm performance in the host country. Our study provides the first evaluation of (1) whether public R&D funding stimulates additional R&D investment in subsidiaries, (2) whether policy-induced R&D drives subsidiaries’ firm performance in the host country, and (3) the differential effects of R&D grants and R&D tax credits. We find that both R&D policy instruments drive subsidiary R&D, and that the policy-induced R&D results in substantial host country improvements in turnover, exports, and value added. Our results suggest several policy implications, particularly for economies pursuing an R&D strategy which targets foreign-owned subsidiaries.

How Do Overseas Economic and Trade Cooperation Zones along the Belt and Road Affect the Economic Growth of Host Countries?

Based on the data of countries along the “One Belt and One Road” from 1998 to 2017, this paper uses the progressive Difference-in-Difference to analyze the impact of overseas economic and trade cooperation zones on the economic growth of host countries, which shows that the establishment of overseas economic and trade cooperation zones significantly promotes the economic development of host countries. Additionally, the specific mechanism of overseas economic and trade cooperation zones to promote the economic growth of the host country is analyzed using the mediating effect model, and the study shows that the overseas economic and trade cooperation zones can encourage the economic development of the host countries by attracting foreign investment inflows. Further heterogeneity analysis reveals that overseas economic and trade cooperation zones have stronger economic boosting effects on countries with lower income levels and poorer business systems. Different types of overseas economic and trade cooperation zones have other economic boosting effects on host countries. Among them, the economic impact of industrial, agricultural, and high-tech zones is significant, while the influence of logistics and comprehensive industrial zones is not yet significant. Finally, the paper carries out further discussion based on the above findings.