Foreign Direct Investment In Countries Research Articles

Spillover effects of natural resources on the attractiveness of foreign direct investment in ECOWAS countries

The economies of Economic Community of West African States (ECOWAS) countries are linked by geography and by a policy of capital mobility. Consequently, the attractiveness of foreign direct investments (FDI) in one country is likely to be influenced by factors that explain FDI in neighboring countries, such as the endowment of natural resources. However, previous empirical studies have overlooked the spatial interaction effects of natural resources on the attractiveness of FDI in ECOWAS countries. In addition, natural resources are factors of production that can justify the location of a Multinational Enterprise in one country at the detriment of another, due to differences in the availability of natural resources. Thus, the main objective of this research is to fill this research gap by analyzing the spatial interaction effects of natural resource exploitation on the attractiveness of FDI in ECOWAS countries. Therefore, the dynamic Durbin Spatial Model (SDM) estimation method with a distance matrix was used for the analysis, covering 12 ECOWAS countries over the period 2007–2020. In addition, the use of the distance-inverse matrix with the dynamic SDM was used to analyze the spatial effects of different types of natural resources in order to test the robustness of the results. In terms of the results obtained, the findings show that the further ahead a country is in exploiting its natural resources, the more it negatively influences the attractiveness of new FDI in its bosom to the benefit of its neighboring countries, which are relatively behind in exploiting their natural resources. Specifically, the mining and forestry exploitation generates positive spillover effects, while oil and natural gas exploitation has negative spillover effects on the attractiveness of FDI from neighboring countries. A synchronization policy and a policy of compensating for the negative externalities linked to the exploitation of natural resources between ECOWAS countries would therefore make it easier to attract FDI and stimulate economic and social development.

FDI and their participation in global value chains: An analysis based on East Asia

Abstract Subject and purpose of work East Asia, particularly China, Japan, and South Korea has experienced rapid economic growth in recent decades, partly through active participation in global value chains (GVCs). Foreign direct investment (FDI) has played a crucial role in this process, enabling the transfer of technology and skills and access to international markets. This paper aims to empirically analyse the effects of FDI on GVCs in East Asian countries over the last two decades. Materials and methods The paper covers six East Asian countries from 2000 to 2022 and explores the relationship between FDI and GVCs using the Driscoll and Kraay (1998) estimator. The estimation techniques are ordinary least squares (OLS) and feasible generalized least squares (FGLS). Results The results reveal that FDI inflows into East Asia positively and significantly affect the countries participation in GVCs, both upstream and downstream. Conclusions These results suggest the need to support FDI in Asian countries to improve their participation in GVCs.

The curse of COVID-19 on foreign direct investment: assessing the role of property rights amidst the pandemic

ABSTRACT How did the COVID-19 pandemic impact foreign direct investment (FDI)? Following the outbreak of COVID-19, the overall volume of FDI inflows plummeted. However, COVID-19’s adverse effects on FDI in host countries exhibited discernible variability contingent upon the characteristics of domestic institutions, particularly the robustness of property rights within these countries. While host countries with strong property rights experienced a mitigated negative impact on FDI, contrary to general expectations, our analysis suggests that host countries with weak property rights may have also evaded a significant reduction in FDI inflows during the pandemic. This was primarily because both strong and weak property rights institutions in host countries conveyed positive signals to investors, which may have incentivized them to continue their investments even amidst the pandemic-induced crisis. Analyzing a time-series cross-sectional dataset of 126 developing countries covering the period 2009–2021, our findings reveal a U-shaped relationship between FDI and property rights. This implies that COVID-19’s impact manifested as a weak negative force on FDI inflows in host countries with weak property rights as well as those with strong property rights. Conversely, host countries with moderately strong property rights tended to suffer a substantial reduction in FDI.

Foreign Direct Investment (FDI), Computer Information Technology, Corruption Perceptions, Economic Growth, and Trade Openness in BRICS Countries

Given a Indonesia’s openness and exposure to the foreign direct investment (FDI), the current study focusses on FDI, particularly inbound from it, as one of the major local and global factors that affect its economy. There are different viewpoints regarding the this effect because some see it from a positive, optimistic point of view, while some have a negative, pessimistic view that are presented researchers impartially. The goal of this research is to examine FDI, computer information technology, corruption perceptions, economic growth, and trade openness in BRICS countries using panel data from 1990 to 2021. The data used is incoming Foreign Investment data to the BRICS countries. We use the Panel Least Square (PLS) method. Results show that computer information technology, Corruption Perceptions, Economic Growth, and Trade Openness encourage FDI in BRICS countries. The development of information and computer technology has had a significant impact on increasing FDI. The low level of corruption increases investor confidence which has a positive influence on raising the FDI in BRICS countries. Economic growth is certainly an attraction for investors to invest, supported by Trade Openness. Keywords: Foreign Direct Investment (FDI), Computer Information Technology, Corruption Perceptions, Economic Growth, Trade Openness

The effect of taxation on Moroccan FDI in African countries: an empirical analysis using panel data

ABSTRACT The paper aims to analyse the impact of taxation policies in African countries on Moroccan foreign direct investment (FDI) using panel data from 29 African countries spanning the period 2005–2021, employing the Estimated Generalized Least Squares estimation method. The findings suggest that high total tax, profit tax, and other tax rates deter Moroccan multinational enterprises (MNEs) from investing in African countries. Conversely, fiscal incentives and reduced tax rates positively influence Moroccan FDI in African countries. Additionally, the results indicate that a high score for tax payment and tax rates positively influences Moroccan FDI in African countries, implying that high-quality taxation policies encourage Moroccan MNEs to invest in African economies. Furthermore, the study finds that the GDP of African economies positively moderates the effect of taxation on Moroccan FDI behaviour. This suggests that the larger the market size of a country, the less severe the negative impact of taxation on FDI.

Foreign Direct Investment and Income Inequality Nexus in Middle-Income Countries: Exploring the Role of Research and Development Expenditure

The study explored the role of Research and Development Expenditure in determining the linkages between foreign direct investment (FDI) and income inequality within middle-income countries. World development indicators were used as a source for panel secondary data from 1990-2023. Panel unit root analysis was employed for data stationarity. The Panel co-integration analysis using the Fully Modified Ordinary Least Square (FMOLS) technique was applied to obtain correlations among three core variables. The findings explain that co-integration exists between variables; all variables are stationary at the first difference level. The FMOLS model incorporates the impact of FDI on the income inequality index with control variables. The analysis suggests that FDI in middle-income countries may decrease income inequality. Increasing research and development expenditures can reduce income inequality by promoting innovation and reducing reliance on external funding.

Impact of intellectual property rights on foreign direct investment in Africa

The study investigated the impact of intellectual property rights on foreign direct investment (FDI) in selected African countries (Burkina Faso, Ivory Coast, Nigeria, Cameroon, Mali, Kenya, Burundi, Central African Republic, Rwanda, Senegal, Zimbabwe, and Tanzania). The purpose of the study is to develop property rights policies that encourages FDI in African countries. How FDI is influenced by the combination of trade openness and intellectual property rights was also examined using the same data set and econometric methods such as the dynamic generalized method of moments (GMM), fixed effects, and pooled ordinary least squares (OLS). Panel data ranging from 2005 to 2019 were used for the purposes of this study. A 1% increase in intellectual property rights led to a 22.73% increase in FDI inflows under the dynamic GMM and a 45.55% increase in FDI inflows under the random effects. These results show that intellectual property rights significantly enhanced FDI under the random effects and dynamic GMM. FDI was insignificantly enhanced by intellectual property rights under the pooled OLS and fixed effects methods. A 1% increase in complementarity between intellectual property rights and trade openness (complementarity term) pushed up FDI inflows by 17.78% under the dynamic GMM, whilst a 1% increase in the complementarity term increased FDI inflows by 16.72% under the fixed effects. In other words, dynamic GMM and fixed effects approaches show that the complementarity component significantly improved FDI inflows. The paper recommends implementing the best property rights strategies to improve FDI inflows into African countries. AcknowledgmentThe author appreciates the moral support from the University of South Africa, his employer.

Determinants that attract and discourage foreign direct investment in GCC countries: Do macroeconomic and environmental factors matter?

In general, foreign direct investments (FDIs) play a crucial role in driving a country's economic development, promoting diversification, and enhancing competitiveness. The Gulf Cooperation Council (GCC) countries, which heavily rely on the oil and gas sectors, are particularly vulnerable to fluctuations in commodity prices. However, these countries have recognized the imperative of economic diversification and have increasingly turned to inward FDIs to achieve it. By attracting capital, advanced technology, and expertise from foreign investors, FDIs enable the GCC countries to expand their economic base beyond the oil and gas sectors. This diversification not only creates employment opportunities but also fosters resilient economic growth, ultimately leading to an improvement in the living standards of the local population. This study investigates the macroeconomic and environmental factors that potentially attract foreign direct investment (FDI) inflows into the Gulf Cooperation Council (GCC) countries in the long run. Additionally, the study explores the causal relationship between these factors and FDI inflows. The panel autoregressive distributed lag (ARDL) approach to co-integration is the primary analytical technique used, utilizing long time-series data from six GCC countries, including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE) during the period 1990-2019. The empirical results indicate that, in the long run, almost all independent variables significantly influence FDI in GCC countries. Variables such as GDP growth (GDPG), inflation (INFL), carbon dioxide emissions (CO2), and urbanization (URB) are found to be highly significant (p≤0.01) in their impact on FDI. Moreover, unemployment (UNEMP) also positively and significantly influences FDI in these countries in the long run. Based on the key findings, strategies aimed at reducing persistently high unemployment rates, maintaining population growth, viewing FDI as a driver for GDP growth, and continuing with infrastructure development and urbanization are expected to attract more FDI inflows into GCC countries in the long run. Additionally, fostering both long-term economic incentives and creating a conducive business infrastructure for investors are vital for attracting inward FDI into any nation, including those in the GCC. This research would benefit various stakeholders, including governments, local businesses, investors, academia, and the local society, by providing valuable knowledge and informing decision-making processes related to economic development, diversification, and investment promotion.

Investment Uncertainties and Economic Growth in Sub-Saharan Africa

Abstract This study investigated the effect of uncertainties, segmented into macroeconomic and political components, on investment in sub-Saharan Africa, with thirty-one countries represented. The analyses were further nuanced to trace the investment-growth link within this set of countries. Two investment types—private and foreign direct—were covered in separate analyses. The sample of countries was chosen through stratified sampling to include oil-exporting, other resource-intensive, and nonresource-endowed countries. The Jorgenson investment model, which explicitly incorporates uncertainty into the investment decision-making process using adaptive and extrapolative approaches, was adopted for the study, and augmented with the partial adjustment model to address the assumption that the user cost of capital adjusts instantaneously. For the two investment types considered, the impartial contract and foreign investment model and the country risk and private investment model were adopted, respectively. The two-way system generalized method of moments technique was employed for estimation. The results showed that foreign direct investment (FDI) in oil-exporting and other resource-intensive countries was only sensitive to macroeconomic uncertainty, while FDI in nonresource-intensive countries was vulnerable to both macroeconomic and political uncertainties. This finding strengthens the belief that, regardless of political instability, natural resources are a major attraction for foreign investors in sub-Saharan Africa. Finally, the study revealed that private investment in the resource-intensive region was primarily affected by macroeconomic uncertainty, whereas its political vulnerability was mainly observed in the oil-exporting and nonresource-intensive regions. To mitigate investment uncertainties in sub-Saharan Africa, it is crucial to focus on minimizing the volatility of interconnected price variables, requiring collaborative efforts.

Effects of mining sector FDI, environmental regulations, and economic complexity, on mineral resource dependency in selected OECD countries

Mineral resources are pivotal in boosting a country's foreign direct investment and economic complexity; nevertheless, their exploitation should be regulated by implementing environmental policies governing economic activities. Thus, current study explores the quantile-dependent association of mineral resource dependency with the mining sector's foreign direct investment (FDI), economic complexity, and environmental regulations for selected OECD economies. The OECD nations comprise developed and developing zones; thus, their importance regarding mineral resource dependency is immensely vital. The annual data from 2004 to 2021 has been taken and Method of Moments Quantile Regression (MMQR) is employed after a preliminary investigation of the panel series. The outcomes revealed that mining sector FDI and economic complexity exert pressure on resources in low- and high-resources-dependent countries. In comparison, environmental regulations reduce mineral resource dependency. A bi-directional causality is documented between mining sector FDI, economic complexity and environmental regulations. This study also applies Generalized Method of Moments (GMM) and Feasible Generalized Least Square (FGLS) to address reverse causality and cross sectional dependency. Notably, a two way relationship is confirm using causality test between FDI, economic complexity, environmental regulations, and mineral resources. Robustness estimators confirm the prior estimations and offer relevant policy implications.

Study on Economic Risks of Chinese Outward Foreign Direct Investment in Countries along the “Belt and Road”

Study on Economic Risks of Chinese Outward Foreign Direct Investment in Countries along the “Belt and Road”

Connect Globally, Thrive Locally: The Spillover Effect of Sister-City Inward FDI on Regional Innovation

Sister cities are a prevalent form of subnational intergovernmental relationships. Such relationships can play an important role in attracting foreign direct investment (FDI). However, we know little about whether and how these relationships influence the localized impacts of FDI in host countries, which is pivotal in achieving the United Nation's Sustainable Development Goals. By integrating the literature on FDI spillover and sister cities, our study proposes that the higher the FDI percentage received by a city from its sister city, the greater the number of patents applied for by firms in that city. Our sample consists of 7273 inward FDI projects into China from 1558 cities in 77 countries between 2003 and 2008. The analysis results support our assumption. We also find that this positive effect is stronger when FDI projects are from recently established sister cities, when the asymmetry in the global economic networks of the two sister cities is smaller, and when regional marketization in host-country is higher.

Influence of political risk environment in neighboring countries on FDI in host countries: the moderating role of green governance in neighboring countries.

This study examines whether political risks in neighboring countries affect foreign direct investment (FDI) by Chinese firms in host countries. Grounded in the perspective of new economic geography, it employs panel data comprising China's FDI across 37 countries along the Belt and Road, spanning from 2003 to 2021. It expands conventional research, which typically focuses on the two-country model, to include a broader examination involving third countries. Utilizing the spatial Durbin model, this study reveals that China's FDI in countries along the Belt and Road is affected by the host country's political risk environment and the spatial spillover effect of political risks from neighboring countries. Green governance practices in neighboring countries regulate this relationship. The results demonstrate that China's FDI in countries along the Belt and Road reveals a risk-averse tendency, with a preference for investing in countries characterized by relatively low overall political risk. After taking spatial factors into consideration, the spatial spillover effect of political risks is significant, as political risk levels in neighboring countries stimulate FDI from Chinese enterprises in the host country. As an effective way to mitigate ecological and environmental risks, green governance also shows significant spillover effects. By strengthening green governance, that can weaken the stimulating effect of political risks from neighboring countries on FDI inflow to host countries. Consequently, investors perceive fewer political risks in neighboring countries and are inclined to invest in those with higher levels of green governance. These research findings provide insights into Chinese investors to assess and mitigate political risks in countries along the "Belt and Road."

Research on the Relationship Between Provincial OFDI And Carbon Emissions Under Dual Carbon Targets

With the development of economic globalization and China's continuous high-quality development, China's global status continues to rise, driving more and more companies to "go out" to conduct foreign direct investment overseas in order to seek a larger market, in the face of the two major tasks of "economic development" and "achieving dual carbon goals", studying the impact of foreign direct investment on my country's carbon dioxide emissions has a very important reality for whether our country can achieve economic transformation and fulfill its emission reduction commitments. and guiding significance. Therefore, this article based on the panel data of energy consumption in 30 provinces and regions in China from 2004 to 2019 . At the same time, per capita GDP, technological level, industrial structure, etc. were selected as control variables, a fixed effect model was established, and an empirical analysis was conducted on the carbon emission effects of my country's foreign direct investment by region and time period. Empirical analysis results show that: The increase in the scale of OFDI will promote the increase of carbon dioxide emissions in China, but there are significant differences in the carbon emission effects of various regions. The carbon emission effect of foreign direct investment in the eastern and western regions is significantly higher than that in the central region. Over time, the expansion of foreign direct investment will reduce the increase in carbon dioxide emissions it brings. In addition, the improvement of per capita GDP and industrial structure will increase carbon dioxide emissions, while the improvement of technological level will significantly reduce carbon dioxide emissions. Finally, reasonable policy suggestions are given based on the results of empirical analysis and the current situation of foreign direct investment and domestic carbon dioxide emissions.

International Peacekeeping Encourages Foreign Direct Investment: Subnational Evidence From Liberia’s Extractive Sector

Attracting foreign direct investment (FDI) to post-conflict countries is difficult. After conflict ends, governments struggle to perfectly enforce the institutions which otherwise shield investors from political instability. Reflecting this governance problem, this article presents a new explanation linking United Nations (UN) peacekeeping operations to subnational allocations of FDI in post-conflict countries. I specifically argue that deployments of UN peacekeeping police credibly signal to foreign firms where future political instability is least likely to disrupt their operations. Data from Liberia’s extractive sector support my argument. Increasing the local deployment of UN police encourages foreign firms to establish new natural resource concessions, particularly in areas where the government’s capacity to uphold the rule of law is weak.

The Analysis of Indicators of doing business and Foreign Direct Investment: A time series analysis for Pakistan

For many developing countries foreign direct investment is very important for the development of economies. The level of FDI for Pakistan is always remained low is compared to other developing Nations who are leading the world. It is also important to notice that to analyze the impact of various parameters which are used for starting in ease of doing business on FDI in Pakistan. At the analysis of ease of doing business indicators it was done to check how the environmental has been changing since 2012 to 2022. This time series data analysis is done for the period of 2012 to 2022 which impacted the multi-currency analysis for Pakistani Nation. Here regression model is run for status statistical software which transform the data and 4 indicators were significantly impacting on the FDI flows in Pakistan. This research also indicated that the contracts, taxes, electricity bills and permits having some significant impact on the FDI flows in economy.

Effects of Science, Technology, and Innovation Official Development Assistance on Foreign Direct Investment in Developing Countries

This study investigated the effects of Science, Technology, and Innovation Official Development Assistance (STI ODA) on Foreign Direct Investment (FDI) in developing countries. The study sought to empirically analyze whether STI ODA has contributed to attracting FDI in recipient countries and whether specific sub-variables, such as absorptive capacity, human capital, infrastructure, and scientific and technical journal articles have a moderating effect. The analysis method was a panel analysis model that combined cross-sectional and time-series data as fixed-effect and random-effect models to reflect individual effects in the empirical analysis. This study highlights the importance of STI ODA in achieving sustainable development goals and fostering economic growth.

Regulatory Framework on Foreign Direct Investment as a Factor in Determining the Economic Growth in Malaysia Post-Covid-19 Pandemic

A country's economic growth rate is the percentage change in the value of all goods and services produced during a certain period compared to the previous period. Since the Covid-19 pandemic was announced and hurting all businesses, several companies have depended on foreign direct investment (FDI) investment. Hence, this study aims to pinpoint new trends that Malaysian legal investment decision makers should follow to prepare for FDI attractiveness post-Covid-19. This study applies empirical theoretical methods with a qualitative approach to the relationship between state governments and foreign direct investors. The results of the analysis show that many countries that offer FDI face economic deficits and are more willing to develop themselves than others. It was agreed that FDI had a positive impact on Malaysia's economic growth and this growth was faced with shortcuts due to the negative impact of the Covid-19 pandemic. In addition, Malaysia has long-standing political problems which have impacted the country's FDI attractiveness. His contribution is to help these components adopt laws and regulations that are good for the future as the country has been dramatically impacted economically.

Corruption, formal institutions, and foreign direct investment: The case of OECD countries in Africa

AbstractPurposeCorruption has shown a mixed impact on foreign direct investment (FDI). This study proposed moderating the role of two—foreign aid (international institution) from the home country and democracy (national institution) in the host country—between corruption‐FDI nexus.MethodologyThe framework is analyzed using panel data analysis (2001–2018) of bilateral foreign aid and FDI from 18 European members of the Organization for Economic Cooperation and Development (OECD) to 34 African countries.FindingsThe presents several key findings. First, Africa's level of government corruption harms bilateral FDI from Europe. Second, the OECD's bilateral foreign aid moderates the negative effects of Africa's host‐country corruption on FDI. Third, the level of democracy in the host country also moderates the negative impact of corruption on FDI. Finally, foreign aid strongly moderates the negative effect of corruption on FDI in democratic countries compared to non‐democratic host countries.Research ImplicationsThis study provides the institutional analysis that bilateral foreign aid and democracy as formal institutions affect the European multinational enterprises's decision to invest in Africa.Practical ImplicationsIt presents the policy and managerial implications. First, European MNEs managers avoid investing in Africa, and governments must take strict actions to attract FDI. Second, foreign aid and democracy motivate MNEs to invest in Africa. Finally, the OECD policymaker could formulate rigorous and relevant conditions for foreign aid to Africa to reduce corruption.Originality/ValueThrough the lens of institutional theory and selectorate theory, the novel institutional role of foreign aid and democracy is proposed and tested between the nexus of corruption‐FDI.

Constitutional instability and foreign direct investment in Africa

AbstractThis paper assesses the impact of constitutional changes on foreign direct investment (FDI) in 49 African countries during the period 1980–2020. The paper uses a dummy variable related to the year of the constitutional change and the number of changes during the study period to capture the frequency of constitutional changes. The results reveal that an increase in the frequency of constitutional changes negatively affects FDI. The negative relationship between constitutional change and FDI is consistent across different measures of constitutional change and FDI and is robust to alternative empirical approaches. These results suggest that frequent constitutional changes may create uncertainty and instability in the investment climate, which may discourage foreign investors from investing in these African countries. The study provides evidence for policymakers that a stable constitutional framework may attract FDI in African countries.