FDI Attraction Research Articles

THE IMPACT OF IT EXPORTS ON ECONOMIC DEVELOPMENT: A COMPARATIVE ANALYSIS OF UKRAINE AND EUROPEAN COUNTRIES

Information technologies have become an integral part of the modern economic environment and social life in Ukraine and the EU. The development of the IT industry in various countries demonstrates significant potential to stimulate economic growth. The article is aimed at assessing the impact of IT exports on the macroeconomic indicators of Ukraine, Poland, Estonia and Germany in order to formulate recommendations for the development of the IT industry in Ukraine. The study examines the impact of the export of IT services on GDP, GDP per capita, foreign direct investment and unemployment rate on the example of these countries by calculating the Fechner correlation coefficient.Based on the analysis of data from 2012-2022, it has been discovered that IT exports have a considerable positive impact on GDP and GDP per capita. In EU countries, the export of IT services also positively influences FDI attraction and the employment level. Despite the growth in the export of IT services, Ukraine shows adverse tendencies in the FDI volumes and increasing unemployment. In Ukraine, there is an inverse weak relationship between the amount of FDI and the IT service exports (Fechner correlation coefficient -0.2727) and a direct moderate relationship with the unemployment rate (Fechner correlation coefficient 0.4545). Considering the complexity of the challenges to the functioning of the economy during the war, the IT sector alone is unable to negate the impact of all threats to the economy of Ukraine.However, the share of IT exports in the total volume of service exports in Ukraine amounted to more than 45% in 2022. That is, on the one hand, the IT sector is developing despite the war (somewhat slower in 2022 compared to previous years); while on the other hand, a strong imbalance remains in Ukraine regarding the predominant increase in the export of IT sector services. According to the results of a comparative analysis with EU countries, we can say that the export of IT services can become a driver of investment attractiveness and decrease unemployment in Ukraine in the future.

Financial Inclusion, Environmental Quality, and Economic Development in Asian Economies: A Panel Data Analysis

The objective of this study is to explore the effect of Financial Inclusion and Environmental Quality on Economic Development of some selected Asian economies. For this purpose, panel data of some Asian economies has been taken from 2004 to 2023 from the World Development Indicators. The results are estimated by using the Fixed Effect Model and Random Effect Model, descriptive statistics, correlation, and causality analysis. The results of Fixed Effect model reveal that GDP is significantly increased by Internet Subscribers & Mobile users (Financial Inclusion variables), FDI, Government expenditure and Carbon dioxide emission while GDP is insignificantly increased by energy use in the Asian economies. The Fixed Effect model suggests policy implications for Asian economies, focusing on digital connectivity, FDI attraction, targeted public expenditure, sustainable growth practices, and energy efficiency.

Factors Affecting FDI Attraction in Some Southeast Asian Countries

The study analyzes factors affecting FDI attraction in some Southeast Asian countries including (Indonesia, Thailand, Philippines, Malaysia, Vietnam). Using FEM, REM and FGLS models with panel data for the period 2010 - 2020, the analysis results show that market size, trade openness and net capital structure of the economy affect investment. foreign direct investment.

Does hosting FIFA World Cup attract inward FDI? An empirical investigation using sectoral panel data of 12 countries

PurposeThe primary objective is to analyze the direct and short-run impact of hosting the FIFA World Cup on inward FDI, considering both aggregate and sectoral levels. Additionally, the study aims to investigate the moderating role of governance quality on this impact, emphasizing the importance of robust institutional frameworks in attracting FDI.Design/methodology/approachThis paper uses panel data spanning 1970–2022, encompassing 12 countries that have hosted FIFA World Cup events. The study employs a linear regression model with a robust weighted least squares (RWLS) estimation method. It incorporates various control variables and the institutional quality as moderating variables, to evaluate the impact of hosting the FIFA World Cup on inward FDI at both aggregate and sectoral levels.FindingsHosting the FIFA World Cup is associated with a significant average increase of $4.33 bn in inward FDI at the aggregate level. Notably, governance quality serves as a critical moderating factor, with well-governed countries experiencing a more substantial increase in FDI, totaling $10.5 bn. At the sectoral level, the results reveal that poorly governed countries attract FDI in primary sectors, while well-governed countries attract FDI in secondary and tertiary sectors. This highlights the nuanced dynamics of FDI attraction depending on the institutional quality of the host countries.Research limitations/implicationsA primary limitation lies in the scarcity of sectoral-level data, constraining the comprehensive study of the relationship between hosting mega-sport events and FDI. Future research could explore alternative data sources and methodologies to overcome this limitation. Additionally, extending the analysis to include other economic indicators beyond FDI could provide a more holistic understanding of the economic implications of hosting major international sporting events.Originality/valueThis study contributes to the literature by focusing exclusively on the FIFA World Cup and undertaking a comprehensive sectoral analysis. By incorporating governance quality as a moderating variable, it adds a nuanced layer to the understanding of the impact of hosting international events on FDI at the sectoral level. The findings underscore the importance of targeted strategies and robust institutional quality in enhancing FDI attractiveness.

Unveiling the role of different types of local absorptive capacity: The effects of inward FDI spillovers on regional innovation

The aim of our paper is to examine the role of different types of local absorptive capacity in moderating the relation between inward FDI spillovers and regional innovation. We use data on the investments of multinational companies (MNCs) in Brazilian regions from 2003 to 2014, linking them to regional innovative performance. Our results reveal that the transfer of technological knowledge from MNCs to local firms cannot be taken for granted since the positive effects of inward FDI spillovers on regional innovation occur when the new knowledge provided by inward FDI can be associated with the existing capabilities of local actors. The different types of absorptive capacity among local actors have diverse effects on their ability to benefit from inward FDI spillovers. Our findings reveal the distinct moderating effects of firm and local institutions capabilities, indicating that firms' absorptive capacity can derive greater benefits from the new knowledge provided by inward FDI. Finally, our study provides new empirical evidence of inward FDI spillovers and sheds new light on regional FDI attraction policies.

Informal institutions’ influence on FDI flows: A configurational fsQCA analysis of corruption as part of the MNEs’ FDI motivation system

Previous research has emphasised the importance of examining institutional influences on FDI attractiveness. There is, however, relatively limited research with conflicting results exploring the relationship between informal institutional effects, such as level of corruption, and FDI motivation. Addressing this gap, we adopt a configurational fsQCA-based approach to link informal institutional influences to FDI motivation driving the presence or absence of FDI flows. Conceptualising corruption as bribery and unfair business practices, we extend our understanding of informal institutional quality impact on FDI inflows. Results reveal that informal institutional effects on FDI vary across regions, with several pathways explaining the presence or absence of FDI, according to the presence or absence of corruption. We add to previous studies by identifying the conditions that, when combined with corruption, are linked to the presence or absence of FDI. Results also indicate that whilst corruption appears unimportant in preventing FDI, and is of only secondary importance in driving FDI, it appears to have importance in determining the type of MNEs’ undertaking FDI. Overall, corruption is likely determining which companies invest in a country, rather than if, traditional reasons for FDI, particularly Resource and Market seeking, being key, with strategic and efficiency-seeking also being of secondary importance.

Factors Affecting the Attraction of New Generation Foreign Direct Investment into Vietnam

The study of factors influencing the attraction of new generation FDI aligns with the trend of focusing on attracting more high-quality and environmentally friendly FDI flows seen in today's countries. The objective of the article is to investigate the impact of these factors on attracting new generation FDI into Vietnam using a sample of 10 Asian countries from 2012 to 2023, including Vietnam, and applying the OLS method to analyze data. Regression results show that economic growth rate, innovative ecosystem, and inflation are factors influencing the flow of new generation FDI into Vietnam.

해외직접투자의 지역기반 정합성: 대구·경북지역을 중심으로

해외직접투자의 지역기반 정합성: 대구·경북지역을 중심으로

Nation branding as a tool to attract foreign direct investments: a case study of Qatar

Nation branding plays a critical role in attracting foreign businesses and, by extension, sustaining countries’ economic development and global competitiveness. Using Qatar as a lens for investigation, this research applied the single, embedded case study method. Purposive sampling with key decision makers in Qatar-based foreign companies representing diverse geographies and industries were used to understand the influence of nation branding on their investment location decision. The findings revealed five key thematic features of Qatar’s nation brand as an investment destination: socioeconomic prosperity, integrated global hub, activist engagement, collectivist culture, and high-end lifestyle. These brand characteristics were compared in relation to the Eclectic Paradigm’s locational advantage and the Anholt Ipsos NBI’s dimensions of exports, governance, culture/heritage, people, tourism, and investment/immigration. The dimensions exerted a strong effect on Qatar’s nation brand and varying levels of influence on FDI attraction. This research contributes to the nexus between nation branding and the FDI literature. Importantly, the results of the study provide useful guidance to government officials, policymakers, and public and private agencies involved in investment promotion. The findings will also prove relevant to foreign investors with regard to their international expansion and location choice.

Major Factors that Impede Reforms in India’s Military-Industrial Complex in 2014–2023

This article intends to assess the negative impact of a number of factors on the reforming process of the Indian military-industrial complex (MIC) under the Bharatiya Janata Party (BJP) government during 2014–2023. The authors distinguish three groups of factors that mostly affect the whole structure of India’s defence industry at present. Conceptual and institutional factors include the contradictions of the basic laws and regulations of the Indian MIC, absence of the common strategy of the Indian armed forces development, politicising of the protectionist measures, offset policy implementation, bureaucracy’s impact and inter-agency contradictions. Economic factors include the problems with FDI attraction, governmental efforts to change the structure of defence expenditures by reducing the pensions to military personnel and attracting the private sector. The group of technological factors focuses on the problems with the quality and delivery delays of the defence production in India. An applied policy analysis, a retrospective analysis of data and content of the main documents allow the authors to conclude that the considered set of factors bears systemic nature and exerts a substantial negative impact on the Indian defence industry. These factors hinder the implementation of ambitious goals of the BJP government, aimed at achieving the “strategic autonomy” in the crucial fields for its national security. Moreover, the current problems of the Indian MIC are exacerbated by the impact of the domestic political situation. Consequently, resolving these problems in the short and medium term seems unlikely. However, in the longterm the reforms being carried out by the Indian government would largely offset the negative effect of the considered factors.

How Does Investment Promotion Affect FDI Inflows? Empirical Evidence from Asian Countries

Despite the fact that investment promotion plays an important role for recipient countries to attract FDI, there has not been much research in the case of Asian countries – which are gradually becoming attractive destinations for FDI investors. To bridge this gap, by utilizing Dunning’s location advantage and UNCTAD’s host country determinant framework, using the data of 20 Asian countries from 2006-2021, and looking into investment promotion from the perspective of budget, our paper found that investment promotion budgets have a significantly positive impact on FDI in these Asian countries. In addition, while the FDI effect is significant in high investment promotion budget countries, it is insignificant in low budget countries. This implies the considerable role of the spent budget of countries for FDI attraction.

Asymmetric Effects of Tax Competition on FDI vs. Budget Balance in European OECD Economies: Heterogeneous Panel Approach

The global trends in taxation have generated a “race to the bottom” in capital income taxation, which is intended to be stopped by OECD through the introduction of a global minimum tax rate (15% of effective average tax rate—EATR). The question is whether the defined tax competition floor would have heterogeneous implications in different economies. The aim of this paper is to examine the long-term relationship between the EATR and FDI, and between the EATR and budget balance (BB) in European OECD economies in the period 1998–2021, using non-stationary, heterogeneous panels. According to the linear PMG model, a significant negative long-term relationship was revealed between the EATR and FDI and between the EATR and BB, while the error-correction parameters are significant and heterogeneous, showing that the speed of adjustments towards equilibrium is different across the analyzed economies. However, the nonlinear PMG results revealed asymmetry as the magnitude of the influence of an EATR reduction has a greater effect on FDI attraction and deficit deepening than an increase in the EATR on the opposite tendencies of FDI and deficit. Policymakers are facing a trade-off related to FDI attraction/budget deficit deepening when making decisions in relation to the EATR, and they are mostly oriented toward FDI inflow using EATR reduction in the analyzed economies.

Privatisations, FDI, and Greece’s regional economic recovery: an empirical study of perceptual view of investors

ABSTRACT This paper aims to explore the perceptions of domestic and foreign entrepreneurs (businesspeople and/or managers) operating in Greece towards the spatial diffusion of FDI effects caused by the privatization programme implemented by the Greek government after an economic crisis. In particular, it investigates whether attracting foreign direct investors through the ongoing privatization programme could be a policy tool for the country's recovery from the prolonged 2008 global economic crisis. To that end, it presents the results of a multinomial logistic regression model based on survey data from a significant sample of domestic and foreign investors in Greece. The key finding of this study suggests that the positive effects of FDI on the recovery of Greece from the economic crisis are more likely to benefit the country's economy as a whole than only the local economy in which the FDI is located. This finding is stronger for entrepreneurs who are (moderately) optimistic about the role of the privatization programme in attracting the interest of foreign investors than others. Overall, there is evidence that FDI attraction policies can help all Greek regions to recover from an economic crisis.

The impact of FDI on ecological unequal exchange in China’s manufacturing industry

This paper uses the panel data of manufacturing subdivision industry from 2000 to 2014 to calculate the exchange of ecological inequality through MRIO model. On this basis, the systematic GMM model is used to investigate the direct and indirect effects of Foreign Direct Investment on the unequal exchange of manufacturing ecology. In addition, the ecological unequal exchange in China’s manufacturing industry is decomposed into ecological unequal exchange on the production side, on the consumption side, with developed regions and with lessdeveloped regions. The study finds that: 1) Industry-wide research indicates that FDI inflows have a significant positive impact on reducing the unequal exchange in the manufacturing sector. This finding contributes to the existing literature on the effects of FDI on ecological inequality. 2) Path-specific studies reveal that FDI primarily reduces ecological inequality in the manufacturing sector through technological effects. However, the scale and structural effects of FDI exacerbate ecological inequality, confirming the findings of some scholars. This nuanced understanding of the effects of FDI on ecological inequality adds to the existing body of research. 3) From the perspective of FDI sources, FDI from Asian countries and regions is more beneficial for improving China’s ecological unequal exchange. This finding provides guidance for China’s FDI attraction policies. 4) Assessing pollution emissions inventories based on the principle of production responsibility is unfair to China from both the production and consumption perspectives. 5) From a regional perspective, FDI effectively reduces the impact of ecological unequal exchange in the manufacturing sector between China and developed economies. These findings confirm that China bears an unequal exchange in the trade process and enrich the understanding of the impact of FDI on ecological unequal exchange.

Impact of the belt and road initiative on trade status and FDI attraction: A local and global network perspective

The Belt and Road Initiative (BRI) is attracting an increasing number of countries to join it for financial support and development opportunities. However, have the countries had higher trade status and been more attractive to foreign direct investment since joining the BRI? Have they cooperated more intensively with other countries? To answer the questions, based on two mixed network centrality measures, we utilize a difference-in-differences approach to examine the impact of the BRI on trade status and FDI attraction using a sample of 93 countries during 2008–2018 from a local and global network view. In multi-dimension characteristic and dynamic evolution analysis, we capture distinct network changes after the BRI. Our empirical results indicate a positive BRI effect on trade status and FDI attraction of BRI countries. From a local network view, we find the BRI effect on trade status requires a longer period, while the BRI effect on FDI attraction fades over time. We document a whole-period positive BRI effect on trade status and FDI attraction from a global network view. Moreover, the pioneering role and mediating effect of FDI attraction are identified. Last, we also find that the BRI alleviates the trade deficit and domestic capital flight.

International Trade on IPR, Economic Growth, and FDI in Indonesia’s Manufacturing Sector

Purpose – Indonesia has always experienced a deficit in the balance of payments in the Intellectual Property Rights (IPR) sector. However, it is hoped that the high value of Indonesian IPR imports will be beneficial in increasing the attractiveness of FDI, encouraging economic growth, and increasing IPR exports. The purpose of this research is to examine the causal relationship between IPR imports (MIPR), IPR exports (XIPR), incoming FDI in the manufacturing sector (FDI), and economic growth (GGDP) in the case of Indonesia. Design/Methodology/Approach – The data used in this research are time series data from the first quarter of 2004 to the fourth quarter of 2021. These data are analyzed using the VECM approach. Findings – The study results show that MIPR has dominated Indonesia’s total trade in this sector. The contribution of import value is 95 percent compared to exports, which are only 5 percent. The VECM estimation results show a one-way Granger causality relationship from the independent variables (FDI, GGDP, and XIPR) to MIPR as a dependent variable. In a short-term causality relationship, IPR imports encourage FDI inflows into Indonesia. Then, FDI in the manufacturing sector significantly impacts Indonesia’s IPR exports. Research Implications – Indonesia’s outflow of money to pay for the use of foreign IPR can encourage the entry of FDI in the manufacturing sector, resulting in a technology transfer that produces domestic IPR, which can be sold abroad.

Insecurity and political uncertainty: Factors that Influence the Fall of Foreign Direct Investment in Mexico

One of the fundamental aspects of any government is to have a national development plan that establishes the guidelines that will guide the destiny of the nation. In the case of Mexico, each six-year presidential term has a national development plan that may or may not have continuity, where one of its main objectives is economic growth. The attraction of foreign direct investment is one of the pillars of economic growth, however, it can be affected by various national and international factors. This research analyzes the behavior of foreign direct investment during four presidential terms in Mexico from 1999 to date. The first twelve years were governed by the national action party (PAN, right wing political party), from 2012 to 2018 by the institutional revolutionary party (PRI, center-right political party) and from 2019 to date by the MORENA political party (left wing political party). The methodology applied for this research was an autoregressive process of order one. We highlight that the arrival to the presidency by the PAN in the year 2000 brought large flows of foreign capital during it´s six-year term, however, during the period from 2006 to 2012 also governed by the PAN there is a decrease in the attraction of FDI of 27% in relation to the previous period. Likewise, a 16% drop in FDI is also observed during the period from 2012 to 2018 governed by the PRI and a drop of almost 5% from 2019 to date, a period governed by the political party MORENA. As a conclusion, we can argue that the drop in FDI in the period studied can be attributed to various factors such as organized crime as well as the distrust of investors derived from the arrival of a leftist political party to the government.

The Effects of Industrial Park Development on Export Earning, Employment and FDI Attraction: Evidence from Ethiopia

This study examines the effects of industrial parks on export earnings, employment creation, and FDI attraction in Ethiopia. Furthermore, the study aims to identify the constraints and potential to achieve sustained and dynamic results expected from the industrial park development. Despite varying degrees of successes and failures, several countries have utilized industrial park and other types of special economic zones as a policy instrument for fostering economic transformation. Ethiopia is one of the African countries that have adopted industrial park development as a policy tool to enhance its economic growth and transformation. However, the effect of the industrial park policy initiative of the country is not well researched. The analysis of the study reveals that industrial parks in Ethiopia have contributed statistically significant effects on export earnings, employment creation, and FDI attraction with significant levels of p= <.001. The analysis also showed that the top five binding constraints for the effectiveness of the industrial park development are low labor productivity, domestic raw material supply constraints, weak forward and backward linkage, transport cost and logistic constraints, and institutions’ capacity constraints. On the other hand, the availability of a trainable labor force, raw material potential, preferential policies and incentives, the economic growth of the country, and the labor wage rise in China and other emerging countries are identified as the top five potentials and opportunities to achieve sustained and dynamic benefits of industrial park development in Ethiopia.

Foreign direct investments from the european union in the economy of Ukraine: current state and trends of involvement

Methods. The theoretical and methodological basis of the research is the work of domestic scientists, data from government agencies, in particular the Ministry of Finance of Ukraine, the State Statistics Service of Ukraine, the National Bank of Ukraine. Information from the International Monetary Fund, the EU website, and the European Business Association was also used. The results were obtained using a range of methods: the method of logical analysis made it possible to develop the logic of the research; structural and statistical analysis of dynamics was used to evaluate private foreign investments in Ukraine by EU countries and types of economic activity; graphic method – for visualization of the obtained research results; grouping methods, tabular – for selection, generalization of data and presentation of calculation results; deduction – to highlight certain factors affecting the investment attractiveness of Ukraine and others. Results. The article is devoted to the analysis of trends in foreign direct investment inflows to Ukraine, in particular from EU member states. The essence of direct foreign investments is considered. The volume of FDI in the economy of Ukraine, FDI inflows (operations and balances under instruments) by EU investor countries were studied. It was revealed what events influenced the excess of FDI outflows over inflows in the national economy. The dynamics of the volume of FDI (share capital) in the domestic economy, in particular from EU countries, FDI (residues on instruments) in Ukraine by types of economic activity were also considered and analyzed. The investment attractiveness is characterized and the main negative factors influencing the investment climate of Ukraine are identified. Novelty. An assessment of the current state of direct foreign investment in the economy of Ukraine by EU countries is provided. The general trends of FDI attraction in the economy of Ukraine are substantiated. Prospects for the further development of Ukraine's investment relations with EU countries have been determined. Practical value. The analysis of the dynamics of the volume of private foreign investments in Ukraine makes it possible to predict the trends of future inflows, in particular from the EU countries. It is also possible to identify EU member states that invest the most and the least in our country and, as a result, develop measures to increase Ukraine's attractiveness for FDI from EU countries, since they are economically and innovatively developed.

The hare and the tortoise: A comparative study of Vietnam's and Kenya's pathways to local enterprise development through foreign direct investment

ABSTRACT Almost simultaneously, two developing countries – Kenya and Vietnam – set out to promote industrial development through FDI. Vietnam embarked on a targeted strategy aimed at selecting FDI that could specifically aid the country’s strategic export sectors through linkages to local industry. In contrast, Kenya embarked on a cross-the-board FDI attraction policy with no specific sector orientation and with few specific linkage policies. This paper asks how FDI has contributed to local industry development in the two countries. Based on an analysis of firm level data from the World Bank Enterprise Survey, the paper compares the two countries’ ability to generate spillovers from FDI spillovers and discusses what explains differences and similarities. The paper finds that in spite of the obvious differences between the two countries in terms of local industrial development and policy, firm and industry factors appeared to be better predictors of variations in spillovers than country level factors. Among the policy implications drawn are that developing countries should focus their FDI policies on firms and industries that have high linkage and hence spillover potential rather than adopting cross-the-board policies.