FDI In Countries Research Articles

The effects of competition policy, regulatory quality and trust on inward FDI in host countries

This article develops a comparative institutionalist framework to investigate how pro-enforcement reforms leading to a change in competition policy regimes attracts FDI in host countries, and how this relationship is moderated by the interplay between key formal and informal institutions. We revisit the FDI theory by integrating insights from economics of competition policy and the most recent debate on how institutions matter to international business. We contend that the effectiveness of competition policy enforcement is a crucial factor in attracting FDI, but only in host countries characterized by institutional configurations where the lack of trust is concomitant with a high-quality regulatory institutional environment. Our analysis on a sample of 63 countries followed in the 1980–2017 period supports our hypotheses. This paper contributes to a deeper understanding on the competition policy–FDI relationship at national level and has implications for policy makers.

The effects of the Eurasian Economic Union on regional foreign direct investment and implications for growth

The positive direct and indirect spillover effects of foreign direct investment on growth are often case specific and not necessarily uniform nor easily predicted. Effects of FDI due to international investment policy changes are often confounded by free trade and customs union agreements that occur simultaneously because trade may be a complement to or substitute for FDI. We review the effects of regional trade agreements on FDI and focus on the new Eurasian Economic Union (EAEU). With annual data from 1995 to 2019 for post-Soviet countries, three members, the Russian Federation, Belarus, and Kazakhstan and nine non-members, Armenia, Azerbaijan, Georgia, Kyrgyz Republic, Moldova, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan, we estimate the EAEU integration effect on country FDI flows, post-2010. We control for other determinants, including infrastructure development, natural resource rents, potentially confounding trade flows, the financial crisis, sanctions against Russia and country fixed effects. The formation of the EAEU did not stimulate FDI and while GDP grew it was not associated with higher FDI. Further growth opportunities via FDI lie with relationships with countries outside the EAEU.

Research on the nonlinear dynamic relationship between FDI and CO2 emissions in the "One Belt, One Road" countries.

This study examines the relationship between FDI and CO2 emissions in a nonlinear framework using data from countries along the "One Belt, One Road" from 1979 to 2017 as the sample. First, the linear analysis method was used to examine the stability of FDI and CO2 emissions in countries along the "One Belt, One Road." In addition, the BDS (Brock-Dechert-Scheinkman test) method and nonlinear Granger causality test are used to investigate the nonlinear relationship between variables. Finally, a threshold vector autoregressive model (TVAR) is used to analyze the dynamic change mechanism between China's FDI and CO2 emissions, and a threshold vector error correction model (TVECM) is used to test how the variables respond to deviations from equilibrium. Then, the Markov switching model is used to test the robustness of the results. The research results show that China, India, South Africa, and other countries all have a nonlinear causal relationship between FDI and CO2 emissions. At the same time, the comovement of FDI and CO2 emissions in China has obvious structural break features, which are relevant for the underlying regime. Furthermore, the results also show that the adjustment process of the FDI toward equilibrium is highly persistent in the first regime, and CO2 emissions will adjust to an equilibrium state at a faster speed in the second regime. Therefore, this paper puts forward different policy suggestions for different countries. For China, we should pay attention to the long-term benefits of FDI and introduce high-tech green FDI.

CONVERGENCE OF HUMAN DEVELOPMENT INDEX: CASE STUDY OF FOREIGN DIRECT INVESTMENT IN ASEAN

This article examines the role of bilateral FDI and income convergence in affecting HDI increase in countries with middle HDI in ASEAN. The ASEAN Economic Community has been developing and it is expected that the gaps between nations can be covered. This article explores how economic intervention through HDI and income convergence can boost HDI improvement. The writers examine the presence of a statistically significant causal relationship between source country’s GDP, home country’s GDP, source country’s FDI towards the home country, source country total FDI, home country total FDI, and the percentage of source country FDI towards source country total FDI with both countries HDI convergence. Measurement is carried out using the generalized method of moments. Based on yearly samples of high HDI countries (Malaysia, Thailand, Singapore) couple with medium HDI countries (Laos, Vietnam, Cambodia, Myanmar, Indonesia, and Philippine) during 2013–2017 period, the writers find statistically significant impact of home country GDP, source country FDI towards all countries, and FDI percentage of the home country compared to all countries.

The Effects of Restrictive Measures on Cross-Border Investment: Evidence from OECD and Emerging Countries

This paper investigates the effects of global and sectoral restrictive measures on crossborder FDI among 49 advanced and emerging countries. We use a gravity model with panel data from 2010 to 2019 and the FDI Restrictiveness Index of the OECD that quantifies the level of restriction in FDI. Our results suggest that global restrictive measures do not significantly affect cross-border FDI in OECD countries, while restrictions in the service sector have negative and significant effects on FDI. Moreover, the overall restrictive measures and those in the service sector negatively impact inward FDI among OECD and big emerging countries. In addition, restrictions in the services sector impede inward FDI in African countries. Interestingly, restrictions in the secondary sector boost FDI between advanced and African countries, with larger effects for inward investments in African countries. The analysis of disaggregated sectoral restrictive measures shows that restrictions in business and other financial services are negatively associated with intra-OECD FDI, while restrictions in the banking sector have a significant positive impact on FDI. We also find that restrictions in the manufacturing sector have restrictive impacts on inwrad FDI in big emerging countries, and those in the mining, quarrying, and oil extraction sector hinder inward FDI in African countries. Reforms to liberalize sectoral restrictions by country have positive effects on FDI, but deregulation of the services sector has beneficial effects on inward FDI in all countries.

Determinants of FDI in ASEAN countries and the role of digital economy

Determinants of FDI in ASEAN countries and the role of digital economy

Causality relationship between energy consumption, economic growth, FDI, and globalization in SSA countries: a symbolic transfer entropy analysis.

To substantiate the validity and usefulness of the symbolic transfer entropy test for longitudinal data, and how it validate or contrast existing study results generated using other forms of causality tests, we empirically examine panel-based causality relationships among foreign direct investment, energy consumption, globalization, and economic growth respectively, between the periods 1970 and 2014 using sub-Saharan African countries as a case study. Based on our findings, we are of the opinion that STE causality test results resonate existing findings, and it is a suitable causality approach for longitudinal data and for developing countries with poor-quality data, most specifically for the sample region.

The influence of cultural and institutional distance on China's OFDI efficiency: fresh evidence from stochastic frontier gravity model

PurposeCulture and institutions are among the essential sources of comparative advantage in international trade and may influence a country's FDI influx. This paper aims to analyze the impact of cultural distance (CD) and institutional distance (ID) on the efficiency of China's outward foreign direct investment (OFDI) for the panel of 43 countries during 2003–2016.Design/methodology/approachThe stochastic frontier approach (SFA) has been incorporated into the standard gravity model of gravity Kalirajan, 1999; Ravishankar and Stack, 2014). SFA has traditionally been implemented to evaluate the production frontier as the highest yield that could possibly be generated from specified input levels. The production process is viewed to be fully efficient if the real output is performed at frontier level. Otherwise, the production process is assumed technically inefficient, which implies potential scope for enhanced output. This error term is split into two parts, a non-negative term and more standard asymmetrical term. The former identifies inefficiencies in production, while the latter retrieves random disordersFindingsThe outcomes assert a U-shaped relationship between CD and the efficiency of China's OFDI. Put differently, when the CD is minimal, the “liability of foreignness” (LOF) effect plays a dominant role; and CD tends to reduce the efficiency of China's OFDI. On the flip side, when the culture distance is greater than a certain threshold level, the “advantages of foreignness” (AOF) effect plays a predominant role, and CD improves the efficiency of China's OFDI. Institutional distance results in the “LOF” effect significantly reduce the efficiency of China's OFDI.Research limitations/implicationsNotwithstanding these contributions, our study has some limitations which offer directions for future research. The major limitation of this research work is the availability of comprehensive data for a well extended time, in particular for the variable of CD. Further, a firm-level study can shed light on the motivations and performance of China OFDI. Finally, given that our analysis focuses on emerging market multinational enterprises (EMNEs) from China, the findings might not be explicitly generalizable to MNEs from other developing countries. Future studies should concentrate on the comparative study of China's OFDI with other developing countries, to deepen our understanding of the effects of ID and CD on the efficiency of OFDI.Originality/value(1) The work is novel in nature as the authors attempt to explore the effect of ID and CD on efficiency of Chinese FDI. To the best of the authors’ knowledge, no research is conducted in this direction in terms of Chinese FDI. (2) Further, the prior studies employed standard gravity model, which may not correctly evaluate the trade potential viewed as the highest potential value. To overcome the shortcomings of the standard gravity model in estimation of the trade performance and efficiency, the SFA has been incorporated into the standard gravity model of gravity.

Informal institutions and comparative advantage of South-based MNEs: Theory and evidence

This paper builds a theory based on “informal institutions” to characterize the comparative advantage of South-based MNEs. MNEs headquartered in countries with poorer state institutions are shown to endogenously invest more in firm-specific institutional capital to compensate for the lack of state institutions, and as an optimal response, undertake FDI in countries with weaker institutions. We conduct an extensive test of the theory using worldwide firm-level greenfield FDI flows during 2009–2016, employing (among others) variations in the interaction of prevalence of informal institutions at home and state institutional qualities of host countries, as well as heterogeneity across sectors and firms in their sensitivity to institutional support.

Drivers of genuine FDI inflows in advanced economies

In this paper we empirically investigate the drivers of genuine FDI inflows in advanced economies for the period 1985–2018. Our contribution to the existing literature is two-fold. First, we use newly available data of genuine FDI flows analysing the role of statistical artefacts, such as special purpose entities and financial round-tripping in headline FDI data. Second, we augment the traditional analysis on the drivers of FDI inflows in advanced economies by considering a range of potential factors which are under the policy makers’ control, i.e. measures that proxy for a country's quality of economic structures. Our results show that it is important to get the data right. In particular, more recently, total FDI data became increasingly distorted thus prompting misspecifications if not cleaned beforehand. Moreover, we suggest that there is a significant empirical relation between the quality of a host country's economic structures and FDI inflows. Our findings are robust to various economic specifications.

Integrated Model To Analyze FDI Role In Success of Commercialization of High-Tech Innovations in Asia

This study aims to analyze the role of FDI in the success of commercialization high tech innovation in Asia countries. The success was marked by the increasing contribution from Asia countries to the export value of high tech products in the world. 
 From 49 sovereign countries in Asia, 21 countries have been selected as research samples. The result SEM analysis shows that FDI inflows to Asia countries generally pure investment from multinational companies to gain profits from the low cost of production factor in Asia, therefore increase their profit margin. 
 In other words, FDI in Asia countries only increase production quantity of high tech products without increasing innovation activity in the countries, which innovation activity can be measured by R&D expenditure, number of resident patent application and number of scientific journals international publication.

Impact of European Union Structural Funds Support Allocated to Different Economic Sectors on Foreign Direct Investment: Evidence from Lithuania

In pursuance of economic growth, developing countries are seeking to attract foreign direct investment. The European Union structural fund supports the economic growth of the less developed countries in order to reduce the gap between the member states, while foreign direct investment is referred to as one of the European Union's funding objectives. The topic is relevant, because after the current European Union's 2014-2020 funding period, the financing conditions for the future will change and this raises a lot of unanswered questions regarding the funding period, funding flows and conditions. The aim of the work is to evaluate the impact of European Union's structural funds on foreign direct investment in selected sectors of Lithuania and to analyse the change of foreign direct investment by changing the flow of funding of the European Union structural funds. The hypothesis - any change of EU structural funds support in different economic sectors of a country has an impact on the country's FDI flows - is confirmed by the study. The methods used for hypotheses testing are correlation analysis and logistic regression analysis. The limitation of the study is that not all the economic sectors were taken into account and the agricultural sector is not analysed.

Impact of European Union structural funds support allocated to different economic sectors on foreign direct investment: evidence from Lithuania

In pursuance of economic growth, developing countries are seeking to attract foreign direct investment. The European Union structural fund supports the economic growth of the less developed countries in order to reduce the gap between the member states, while foreign direct investment is referred to as one of the European Union's funding objectives. The topic is relevant, because after the current European Union's 2014-2020 funding period, the financing conditions for the future will change and this raises a lot of unanswered questions regarding the funding period, funding flows and conditions. The aim of the work is to evaluate the impact of European Union's structural funds on foreign direct investment in selected sectors of Lithuania and to analyse the change of foreign direct investment by changing the flow of funding of the European Union structural funds. The hypothesis - any change of EU structural funds support in different economic sectors of a country has an impact on the country's FDI flows - is confirmed by the study. The methods used for hypotheses testing are correlation analysis and logistic regression analysis. The limitation of the study is that not all the economic sectors were taken into account and the agricultural sector is not analysed.

Does Financial & Social Development are Important for Economic Growth? An International Scenario

Financial and Social Development plays pivotal role in the economic growth of nations. Developed countries have strong financial and social infrastructure. This study focuses on the social and financial development in relation to economic growth of developed, developing and frontier economies. Gross Domestic product (GDP) per capita used as dependent variable. Domestic credit, market capitalization, turnover ratio, household consumption, foreign direct investment, capital formation, Co2 Emission and trade openness are used as independent variables. government expenditures on education and current health expenditures are use as social variables. Unemployment and inflation rate also use as control variables. Pooled OLS (ordinary least squares), fixed effects and random effects models are used to check the relationship among variables from 2001-2017. Results show positive and significant relation between Gross Domestic product (GDP) Domestic credit, education expenditures and health expenditures in case of developing countries. Market capitalization, turnover ratio, foreign direct investment, and trade openness have a positive but insignificant relationship. Co2 Emission, inflation and unemployment rate have negative and insignificant relation with GDP per capita. In advanced countries Inflation rate trade openness and FDI have positive and significant relation with GDP per capita. Domestic credit, market capitalization, turnover ratio, household final consumption and Co2 Emission have a negative relation with GDP per capita. Education and health also have a negative and insignificant relation with GDP per capita. In Frontier economies there is a positive and insignificant relation of market capitalization, FDI, Co2 Emission and health expenditures with GDP per capita. capital formation, turnover ratio, household consumption, trade openness has negative and significant relation with per capita. Education expenditures have positive and significant relation with GDP per capita. Co2 have positive but insignificant relation. Inflation and unemployment rate have negative but insignificant relation with GDP per capita.

Game Theory-Based Pathway Selection for Fair and Reciprocal Cooperation among Ports along the Maritime Silk Road

The transport infrastructure connection is the fundamental base for the promotion of the Silk Road Economic Belt and the 21st Century Maritime Silk Road under the background of the Belt and Road Initiative. Ports, as the core elements in the connection, contribute to the practical infrastructure connections along the maritime road. A multihierarchical cooperation framework in between the ports and based on the fair and mutual benefit concept is the cornerstone of constructing the 21st Century Maritime Silk Road and the engine fuelling the updation of Chinese seaports and growth. This paper first defines the port cooperation along the 21st Century Maritime Silk Road and analyses the opportunity and challenges from the perspectives of the port-industrial and the port-region interaction. Then, it develops research into port cooperation, path selection, cooperation mechanisms, and application conditions in analysing port FDI, BOT, port alliances, multimode transport, and the institutional innovation of China’s ports. In conclusion, we develop a game theory selection analysis to study multiwin cooperation for port FDI in host countries along the 21st Century Maritime Silk Road.

The Impact of the Euro on Inward FDI in Euro Area

Purpose - The Purpose of this study was to analyze the effects of the introduction of the euro on inward FDI in euro countries. Design/methodology/approach - This study 609 panel data for 18 euro and 11 non-euro countries and 21 years (1996-2016). The Panel regression analysis was hired in order to analyze the data. Findings - First, our results indicate the positive influence of the introduction of euro on inward FDI. The results show that the introduction of euro was statistically significant and had a quite substantial effect on inward FDI in euro countries. We conclude that the euro has a positive impact on the FDI between euro countries as well as on FDI movement from non-euro countries to euro countries. Second, European economic integration has also exerted a positive effect on inward FDI in euro countries. Research implications or Originality - The current findings suggest that trade liberalization-through the Single Market and introduction of euro - induced global firms can result in more investment in EU and euro area countries. It must be noted that the most important determinant of inward FDI in euro countries is market size. The greater the GDP of the receiving country, the larger are the foreign direct investments. .

How does foreign pressure affect a firm's corporate social performance? Evidence from listed firms in Taiwan

We propose the foreign pressure (FP) hypothesis to illustrate how firms confronting FP from their FDI in countries with high CSR affects a firm's corporate social performance (CSP). We use a battery of proxies from a firm's FDI exposure to measure FP and adopt a sample of listed firms in Taiwan to verify the FP hypothesis. Alternatively, the positive FP–CSP relationship can be explained with the learning effect, indicating firms learn and voluntarily adopt practices of high CSR. However, we cannot confirm a positive FP–CSP relationship when firms have FDI in tax havens. Moreover, firms respond more to FP when it originates from concerns with CSP than from strengths in CSP. These results are inconsistent with those of the learning effect. Finally, we explore CSP sub categoriesand note the FP effect is more salient in employee-related CSP than in community or environment-related CSP.

Why Enterprises Do Not Invest in Europe? Management Claims and Countries Conditions in Developed and Emerging Markets

The choice of location of foreign direct investments is still one of the most explored topics in the economic and managerial literature. However, these studies focus on the variables that positively influence the choice of investing in a foreign country but rarely analyze factors that lead to the decision to not invest. While the economic literature considers the decision to invest as a linear process, the organizational approach recognizes complex factors in the decision-making processes. The present study is positioned within this debate. More specifically, the aim is to understand if the variables claimed as threats by managers are really barriers to investments and then if they negatively influence the level of inward FDI in the European countries, with a specific focus on differences between developed and emerging countries. The context analyzed is represented by the 28 countries of the European Union, including a set of 12 variables that were collected and tested through a stepwise regression model. Subsequently, the differences between emerging and developed countries are analyzed by means of cluster analysis. The findings highlight the existence of a mismatching between management claims on FDI barriers and the actual institutional and economic situations in European countries, due to informational and cognitive shortages or the opportunity to provide socially desirable answers. The cluster analysis underlines how managers claim on barriers to FDI seem to have a greater matching with conditions of emerging countries, showing a possible deepened knowledge of these contexts, compared to developed countries.

Natural resource or market seeking motive of China’s FDI in asia? New evidence at income and sub-regional level

Asia is a heterogeneous region including countries with distinct features in quite a few facets. This study is designed to unravel the motivations of Chinese FDI in 30 Asian countries (For list of countries see Appendix 1.) during 2003–2016. For estimation, we utilised the Random effect (RE), Fixed effect (FE) and System-GMM (SGMM) methodologies. We transpired that both market and natural resource (mineral richness) seeking motives of Chinese FDI in the whole sample analysis. With respect to income group, we confirmed the market seeking FDI in both high and middle-income countries whereas, mineral richness is priority for Chinese FDI in middle-income group. Thus, Chinese firms targeted middle income developing economies to acquire non-fuel natural resources. Analogously, on the regional basis, the results show that in all regression models, GDP is positive and significant predictor, characterising market seeking FDI by Chinese firms in West, East and South East Asia. In resource seeking motive, among the two types of natural resources, mineral richness affect Chinese FDI positively in East & South East Asia. In a nutshell, seeking market is the common motive for Chinese FDI in the entire sample, whereas the resource seeking motive varies across the income groups and regions.

FDI and labour share of home-country: empirical evidence from micro data of Chinese enterprises

When an enterprise is operating globally, it will surely lead to the flow of production factors, and thus change the factor income distribution in the home country. This paper studies the influence of FDI on the labour share in enterprises’ home country under the background of continuous economic globalisation. Based on the theory of Heterogeneity of FDI Motivation, this paper first analyzes the influence mechanism of FDI on home country labour share. Then, with the micro data of Chinese enterprises, this paper adopts Mahalanobis distance matching and Difference-in-Differences (DID) estimation to have empirical test on the influence of FDI on the labour share in enterprises’ home country. The results show that, overall, enterprises’ FDI and labour share in the home country present a negative correlation. In terms of heterogeneity of FDI motivation, market-seeking FDI significantly decreases the labour share in the home country, while resources-seeking and technology-seeking FDI significantly increase the labour share in the home country. From the perspective of host country heterogeneity, FDI in developed countries significantly increases the labour share in the home country, while the FDI in developing countries inhibits the increase of labour share in the home country.