FDI Firms Research Articles

Pollution haven or pollution halo? Testing direct and spillover effects of FDI

FDI has direct effects (effects on foreign-invested firms) and spillover effects (effects on other firms) on pollution emissions. To split out these two effects, this paper divides firms into different clusters based on their industries and regions, then considers the interactions among firms in a cluster following the framework of Hudgens & Halloran (2008). We find that varying ratios of FDI firms within a cluster influence the magnitude of effects on firms' pollution emissions. Specifically, this paper finds inverted “U-shaped” direct effects of FDI on firms' pollution emissions. We also find “U-shaped” spillover effects and total effects: once the proportion of FDI firms within a cluster exceeds a specific threshold, we observe a decline in both spillover effects and total effects of FDI in mitigating pollution emissions.

The long-term effects of war on foreign direct investment and economic development: evidence from Vietnam

In this study, we find a negative effect of unexploded ordnance (UXO) on the geographical density of foreign direct investment and large firms in Vietnam. A 1 % increase in the proportion of UXO-contaminated areas leads to a 0.69 % relative decrease in the density of FDI firms within districts. Point estimates for the elasticity of the density of joint-venture FDI firms and state-owned enterprises (SOEs) due to UXO are smaller, equal to -0.56 and -0.36. Moreover, we also find that a 1 % increase in the proportion of UXO-contaminated areas leads to a 0.38 % relative decrease in the intensity of nighttime light.

U.S. Monetary Policy, Emerging Market FDI Firms and Trade Credit

U.S. Monetary Policy, Emerging Market FDI Firms and Trade Credit

Foreign Investment in Vietnam: A Review of Corporate Compliance by Investors from Japan

Japan is one of the most significant foreign investors in Vietnam. However, information about trade compliance by Japanese firms in Vietnam remains scant. This study draws from a new survey of Vietnamese import and export enterprises in 2019, which includes both local and Japanese firms. It shows that Japanese firms are performing better than local firms in terms of trade compliance and regulation. They are also more likely to acknowledge the importance of public-private partnerships and the legal capacity of human force. However, the biggest concerns and obstacles of these actors are Vietnam’s specialized laws and regulations in the cross-border trade of goods. These findings offer important policy implications to enhance trade compliance for Vietnamese enterprises in general and Japanese FDI firms in particular. Authorized Economic Operator Program, Japanese FDI firms, Trade Compliance, Trade Facilitation, Vietnam

THE MALAYSIA’S POLICIES ON ENCOURAGING THE LINKAGES OF FDI AND DOMESTIC FIRMS, THE LESSIONS FOR VIETNAM

By synthesizing the literature reviews and summarizing the policies made by the Malaysian government in attracting inward FDI and improving the linkages between FDI and domestic firms, the study brings out the significant lessions for Vietnam, which include (i) linkage formation; (ii) attracting foreign investors; (iii) improving the labor quality; (iv) increasing the domestic firms’ capacity; (v) improving the linkage between FDI and domestic firms; and (vi) macroeconomic policies.
 Keywords: inward FDI, Linkages, Domestic Firms, Investors.

Special Economic Zones and Competitiveness of Foreign Direct Investment Manufacturing Firms in Kenya

Special Economic Zones are designated areas within a nation's borders with the objectives of improving trade balance, attracting more investment, creating jobs, and enabling efficient administration. In Kenya, SEZs benefit from business-enabling policies and sector-appropriate on-site and off-site infrastructure and utilities. For the last 20 years, the Government of Kenya has been investing on Special Economic Zones as one among the innovative strategies geared towards enhancing competitiveness of Foreign Direct Investment firms in the manufacturing sector. While it is noteworthy that SEZs have somehow contributed to the increase in the inflow of FDIs in the manufacturing sector in Kenya, it is equally important to point out that such improvement is not commensurate with the size of Kenya’s economy as well as the level of investment put in by the Government. In fact, in a more worrying trend, a good number of FDIs have ceased their manufacturing operations in the country to retain only the marketing and distribution functions of their businesses, a decision that has cut thousands of jobs. These FDIs have shifted focus to offshore manufacturing. Therefore, this paper is the product of the study carried out to establish the influence of SEZs on the competitiveness of FDI manufacturing firms in Kenya. Specifically, the study focused on the influence of; technology spillovers, labour availability, market accessibility and level of export, on competitiveness of FDI manufacturing firms in Kenya. A cross-sectional research design was used in the study. The unit of analysis was the management staff of 66 manufacturing FDIs who were members of Kenya Association of Manufacturers (KAM) in the Nairobi Metropolitan while the unit of observation comprised; human resource manager 1, finance manager 1, marketing manager 1, production manager 1 and CEO/GM/owner 1. Multistage sampling method was used in the study. Multistage Sampling is the probability sampling technique wherein the sampling is carried out in several stages such that the sample size gets reduced at each stage. At the initial stage, the study applied Yamane formula to determine the number of firms in each of the 9 categories for the study. From the selected firms, 5 members of management (1CEO and 4 Managers) were selected using purposive sampling technique. Lastly, Yamane formula was used to arrive at the final sample size. This resulted to a total population of 325 and a sample size of 283. Primary data was collected through a semi-structured questionnaire while secondary data involved analysis of statistical abstracts from published materials and reports. Data analysis was carried using the statistical package for social sciences (SPSS) software version 25 as well as descriptive and inferential statistics. Primary data was collected through a semi-structured questionnaire while secondary data involved analysis of statistical abstracts from published materials and reports. Data analysis was carried using the statistical package for social sciences (SPSS) software version 25 as well as descriptive and inferential statistics. In the overall the study found that special economic zones had influence on competitiveness of FDI manufacturing firms in Kenya, however the findings on some of the sub-variables calls for their review and relevant actions taken by the Government to ensure enhancement of competitiveness of FDI manufacturing firms. This is because about 37% of the respondents either moderately or never at all agreed that there was conducive business environment in their zones. Further, the study found that over 51.4 % either moderately or never at all agreed that other firms had acquired technology and skills from the FDI firms in the Zones. Consequently, the study recommends an evaluation of the policies and infrastructure that support SEZs in the Manufacturing sector in Kenya.

The impact of digital inclusive finance on the growth of the renewable energy industry: Theoretical and logical Chinese experience

The development of renewable energy is the key to tackling climate changes and ensuring energy security. Meanwhile, the process is usually associated with a huge investment and financing gap, especially for transitional countries like China. Hence, developing and innovating the traditional financial system is urgent. However, existing studies have mainly focused on traditional financial perspectives, and few papers have critically examined how digital financial inclusion affects the growth of renewable energy industries. To this end, using Chinese provincial data from 2011 to 2020 and applying Feasible Generalized Least Squares (FGLS) method, this study explores the effect of financial inclusion on renewable energy and its underlying mechanisms from the production and consumption perspectives. It is found that the impact of financial inclusion on the production side of the renewable energy industry is significantly better than on the consumption side, and there is heterogeneity effect in different energy resource varieties, different regional locations, and different financial regulation intensities. The financial inclusion on renewable energy has a significant pulling effect in photovoltaic and wind provinces, but not in large hydropower provinces. Then, its driving effect is particularly pronounced in the northern region. Nonetheless, it is not significant for renewable energy consumption in the southern region. Besides, this positive effect cannot be achieved without stronger financial regulation. The mechanism of action assessment finds that optimizes the consumption pattern, increase the competition of commercial banks, and improve technological innovation all contribute to the positive effect whereas, FDI shows the negative effect. This study provides new evidence on China's achievement of the energy transition, suggesting the need to further improve incentives for FDI firms and to strengthen consumption-side guidance.

Environmental Efficiency Evaluation in Vietnam Textile and Garment Industry: Super-SBM Model with Undesirable Output Approach

The purpose of the paper is to estimate the environmental efficiency of the Vietnamese textile and garment industry and evaluate the impact of the factors on environmental efficiency. The study uses firm-level panel data from the Vietnam annual enterprise survey data for the 2012–2018 period in the Vietnam textile and garment industry to evaluate the environmental efficiency by using the Super-SBM DEA model with undesirable output and applies the Tobit regression model to measure the impact of the factors on the environmental efficiency. This study evaluates environmental efficiency and assesses the impact of some core factors, including the origin of imported machinery and equipment, the origin of imported materials, the management of industrial zones, and the presence of FDI firms, on environmental efficiency at the firm level. The results indicate that the average score for environmental efficiency is 0.233. Some factors, such as income per employee, machined goods imported from developed countries, industrial zones, firm improvement processes, and the presence of FDI, have a positive impact on a firm’s environmental efficiency, whereas materials made in Vietnam have a negative impact.

Factors Affecting the Performance of Small and Medium Enterprises Regarding the Sustainable Development Goals—The Case of Foreign Direct Investment Firms in Vietnam

The owners of SMEs in Vietnam mainly focus on business performance in the short term. In recent years, FDI firms have demonstrated interest in both business efficiency and sustainable development. These issues have attracted the attention of scientists and policy makers in Vietnam. Therefore, this study aimed to determine the factors affecting the performance of small and medium enterprises in Vietnam regarding the Sustainable Development Goals (SDGs). Using the latest published survey data up to March 2022 for food and beverage, wood and steel foreign direct investment enterprises, combined with a data envelope analysis model in step one and Tobit regression in step two, the results from this quantitative study are as follows: (1) the production efficiency index of Vietnamese FDI enterprises ranges from 82.5% to 89% depending on the industry (assuming variable output to scale); (2) the factors financial leverage, renewable consumption, scale and operating time are related to the performance of FDI enterprises, and have a positive effect on performance; and (3) financial leverage and renewable consumption can generally boost a firm’s performance in the case of FDI SMEs in the food and beverage, wood and steel industries. This research also suggests some solutions to achieve the Sustainable Development Goads (SDGs) in the FDI SMEs of Vietnam.

Sustainable Technology Diffusion Manufacturing Outwards FDI Firms: Evidence from China Using Numerical Simulation Methods

Technology diffusion plays an important role in the improvement of technological innovation capabilities and can provide strong support for sustainable economic development. This paper aims to analyze the influence mechanism of technology diffusion on sustainable development, such as the initial investment willingness, technology spillover effects and absorptive capacity, technology transfer prices and intellectual property protection, government subsidy support and penalties. However, there is a lack of systemic game mechanism and numerical simulation methods for heterogeneous enterprises. Based on the government, OFDI companies, and domestic companies that are not involved in FDI, we have proposed the evolutionary game model for technology diffusion on sustainable development. The results show that: (1) The government, OFDI firms, and domestic firms are influenced by each other’s initial willingness to a different extent; (2) Different combinations of technology spillover and absorptive capacity lead to different sustainable evolution results of technology diffusion; (3) Reasonable technology transfer pricing and enhancing the protection of property rights can improve the efficiency of the technology diffusion sustainable development system; (4) Both financial support and penalties encourage technology diffusion sustainable development, but excessive financial support reduces the government’s willingness to participate ultimately. Therefore, this paper proposes that the government should increase its willingness to participate and increase punishment for unreasonable pricing behaviors. The stronger the stimulus effect of OFDI firm technology spillover and domestic firm absorptive capacity, the stronger the stimulus effect; however, there is a certain threshold effect, at the same time increasing the property rights protection of OFDI firms and the penalties for opportunistic behaviors of domestic firms, and establishing a diversified financial support policy, will increase the efficiency of the technology diffusion sustainable development system.

FDI and Total Factor Productivity Nexus in Nepal

This study empirically investigates the impact of FDI on the TFP growth of firms in Nepal from 1990 to 2018, employing an econometric model based on the Cobb-Douglass production function and a theoretical Solow model of the TFP growth accounting method. The study used a time series database (1990–2018). As a result, the econometric and non-parametric TFP estimations provide mostly positive TFP growth of FDI firms in Nepal, except for a few cases influenced by political and security disturbances. Positive TFP growth in almost years indicates increased productivity of FDI firms at a lower than expected level, despite the fact that FDI firms are still constrained by problems such as massive inferior labor, no significant technological and financial transfer, and a poor business environment. Issues of continuity and stability between the two periods indicate the unpredictable situation of productivity. Therefore, FDI policy framework should focus on output and outcomes to invite FDI rather than FDI size, nature, and source.

The Impact of Corporate Social Responsibility on Strategic Objectives: Evidence from Vietnam

Carrying out corporate social responsibility (CSR) not only brings benefits to the community but also benefits the business itself. There are many studies on the application of CSR in business strategies to create competitive advantages and sustainable development. However, CSR is still a new term in Vietnam, and the concept has various definitions and most studies are mainly theory-based with limited research on the real situation of CSR practices, especially in the case of FDI firms. Therefore, this study aims to investigate the impact of CSR implementation on corporate strategic goals, including reputation, innovation and differentiation of FDI firms in Vietnam. This study uses regression models to analyze survey data of 224 FDI enterprises in Hanoi, the capital of Vietnam. The empirical results indicated that implementing CSR significantly impacts improving the efficiency of deploying three business strategic goals: enhancing reputation, enhancing innovation, and creating a competitive advantage. The findings of this study suggest that FDI enterprises in Vietnam need to renew their perspectives and approaches to integrate and implement CSR, not only seeing CSR as a costly obligation or merely charitable activities, but truly an opportunity to create competitive advantages and sustainable development.

The impact of carbon emission trading scheme on export: Firm-level evidence from China

The carbon emission trading scheme (ETS) is an important measure to implement China’s “double carbon” strategy.We use “China’s carbon emission trading pilot policy” as a quasi-natural experiment to identify theeffect of this market-based environmental regulation on a firm’s export and its impacting mechanisms.Based on the Propensity score matching and difference-in-differences (PSM-DID) method, we observe robust evidence that the carbon emissions trading pilot policy significantly increases the export of regulated firms. And also find that this policy positivelyaffects the exports of both SOEs and non-SOEs. Considering enterprise heterogeneity, the policy positivelyimpacts the exports of FDI firms, large firms, and low industrial concentrations. Moreover, we examine how environmental regulation could affect firmexport through technological innovation, productivity, and product research. The observable evidence leads us to cautiously conclude thatmarket-based environmental regulations in even developing countries could achieve export growth.Based on our findings, we suggest that: 1) policymakers should limit CO2 emissions quotas to ensure an appropriate increase in the price of CO2 emissions; 2) to design a unified carbon ETS market, researchers should explore ways to activate market-oriented environmental regulation tools based on the carbon emission price.

Firm life cycle and foreign direct investment spillover effect: The case of the Czech Republic

AbstractForeign Direct Investment (FDI) and the resulting spillover effects can be important for a country's development and economic growth. Using panel data from 2004 to 2019 in the Czech Republic's manufacturing industry, this paper finds the following. First, FDI firms generate positive horizontal labour effects and backward labour linkage on domestic firms. However, other hypothesized effects of FDI firms, such as horizontal and backward competition and the forward linkage of FDI, were not significant. Second, FDI firms at the mature and shakeout stage generate more spillover than those at the introduction and growth stage. There is no spillover impact on domestic firms by FDI firms at the decline stage. This is the first paper to examine the role of firm life cycle on the spillover effects of FDI.

FDI and firm productivity in host countries: The role of financial constraints

This paper studies the effect of FDI firms’ financial advantages on firm productivity in host countries and examines the related policy implications. If FDI firms face lower financing costs but have higher fixed production costs than local firms, a simple Melitz-type model predicts that FDI firms could have even lower cutoff productivity than local firms, especially in financially vulnerable sectors. The same mechanism will also lower the average productivity of FDI firms especially in financially vulnerable sectors, although FDI firms on average are still more productive than local firms. These predictions are supported by the Chinese firm-level data. Then, we study policy implications in a two-country model that resembles these empirical patterns. The counterfactual policy analysis shows that offering tax benefits to FDI firms could be counterproductive because it attracts FDI firms that are even less productive than local firms. The policy in the host country to improve its financial market efficiency could also hurt the country’s welfare because of the interaction between financial market reforms and the distortionary taxes imposed on local firms to finance FDI subsidies.

The relationship among local marketing, regional linkage, a destination image, and foreign direct investment firms’ satisfaction: A case study in long an province

The study investigates the relationship among local marketing, regional linkage, a destination image, and FDI firms' satisfaction in Long An province. Qualitative and quantitative research was implemented as follows: The qualitative research was executed through focus group discussions with 10 owners or export managers of FDI firms; The quantitative research was conducted through direct interviews with 491 managers of FDI firms in Long An. Empirical results justifies the relationship among local marketing, regional linkage, a destination image, and FDI firms' satisfaction. The results show the following key metrics: (i) FDI firms' satisfaction is affected by a destination image (with Beta = 0,141), local marketing (with Beta = 0,202), and regional linkage (with Beta = 0,173); (ii) A destination image is affected by regional linkage (with Beta = 0,456), and local marekting (with Beta = 0,150); (iii) Local marketing is affected by regional linkage (with Beta = 0,367). The findings are foundational for policy proposals for Long An province to improve the satisfaction of FDI enterprises. However, the research has certain limitations: (i) the study was only conducted in Long An, (ii), the spatial correlation among Ho Chi Minh City, Tien Giang and Long An linked regions was neglected.

The impact of FDI on human capital development in SACU countries

PurposeThis paper aims to examine how FDI trickle down to human capital development in SACU member states.Design/methodology/approachA longitudinal research design and feasible general least squares was used over the periods 1990 and 2018.FindingsThere is supporting evidence that FDI enhances human capital when primary school enrolment rate is used. However, the reverse holds for the secondary level of education. It can be argued that although FDI exhibits a positive effect on primary education, optimal spillovers to human capital development has not been realized. An indication that certain level of human capital may be required to ensure the optimal benefit of FDI or the types of current FDI does not enhance FDI-led-human capital hypothesis.Practical implicationsThe negative effect of FDI toward secondary level of education could be an indication of a weak absorptive capacity. SACU's current dominance of FDI activities toward extractive industries could limit potential benefit of FDI due to capacity constraints. Practical policy implications indicate that SACU member states need to ensure that it attracts FDI toward smart investment that enhances human capital development.Social implicationsThere is need to a gear FDI firms toward corporate social responsibilities that will stimulate secondary education.Originality/valueThe novelty of this paper is twofold. First, it focuses on SACU countries where majority of the people are trapped with poverty and inequality issues. Second, SACU member states have used greenfield FDI as a policy instrument to enhance human capital. However, human capital link remains weak. This creates a need to search for smart FDIs that are committed toward community transformation through human capital development.

Innovation Spillovers between Domestic Firms in China

ABSTRACT This study aims to clarify whether innovation spillover effects can be observed between domestic firms in China. Using listed firms’ data and the R&D capital stock and R&D workers’ data at the industry level, we examined whether Chinese domestic firms benefited from spillovers from not only FDI firms but also from the other domestic firms in terms of their innovations. We found that state-owned enterprises benefited from the spillover effects on innovation input and output from the other domestic firms in China, whereas the spillover effects on the innovations of private firms (PEs) from the other domestic firms were conditional on their availability of financial resources and became larger as their available financial resources increased. Whether PEs could benefit from spillover effects through the human capital held by the other domestic firms was also conditional on their availability of financial resources.

Wages, labor quality, and FDI inflows: A new non-linear approach

Although theory predicts that locations with lower wages will attract more FDI inflows, the empirical results from traditional linear regression models are rather mixed. We consider the possible impact of labor quality, along with wages, and build a simple FDI location choice model to capture the potential nonlinear relationship among the three. Further, we propose a partially linear panel data model to investigate the wage effect on FDI location choices. Using macroeconomic province-level data from China between 1993 and 2018, we find that the marginal effect of wage is generally a decreasing function of labor quality. This implies that facing low labor quality, FDI firms prefer locations with high wages that ensure high labor quality; while facing high labor quality, their preferences for low labor costs dominate. Our nonlinear approach reconciles the mixed results in the empirical literature on how wages affect FDI inflows and the role of labor quality in attracting FDI.

한국 제조 기업의 해외 군집현상과 서비스 기업의 해외직접투자 위치 선택에 대한 실증분석

본 논문은 2009년부터 2018년까지 MDIS 기업수준 데이터를 사용하여 한국 제조업 분야 기업의 해외직접투자가 서비스 분야 기업의 해외직접투자를 유인하는지를 외연적 한계(extensive margin)와 내연적 한계(intensive margin)로 나누어 실증분석을 시도하였다. 그 결과 우리나라 제조 기업이 군집도가 높은 지역일수록 서비스 기업의 해외직접투자도 외연적 · 내연적으로 확장되는 것이 관찰되었다. 이는 한국 서비스 기업이 해외에서 자국의 제조 기업과 연계하여 넓은 의미의 글로벌 생산-서비스 네트워크를 구축하고 있음을 시사하고 있다.