Foreign Direct Investment In Countries Research Articles

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.

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.

The Relationship between Geothermal Energy Consumption, Foreign Direct Investment, and Economic Growth in Geothermal Consumer Countries: Evidence from Panel Fourier Causality Test

This paper investigates the relationship between geothermal energy consumption, economic growth, and foreign direct investments in countries where geothermal energy production is possible. Panel Fourier Granger causality and panel Fourier Toda–Yamamoto causality tests (2020–2021) were applied, which can take into account smooth transitional structural breaks with trigonometric functions using quarterly data for the period 2016 Q1–2020 Q3. Data were obtained from the International Energy Agency (IEA), Federal Reserve Economic Data (FRED), and the OECD official website. According to the results obtained based on panels, there is one-way causality from economic growth to geothermal energy and one-way causality from geothermal energy consumption to foreign direct investments. The results obtained based on individual countries indicate that one-way causality from foreign direct investment to geothermal energy consumption was found for Mexico and Portugal, and one-way causality from geothermal energy consumption to economic growth was found for Italy and Mexico. On the other hand, causality from economic growth to geothermal energy consumption was observed for Germany, Japan, and USA. No significant results were found for Turkey and New Zealand, and it is understood that the macroeconomic structures of these countries are not affected by geothermal energy. The difference in the results reveals that the application recommendations on this subject should also be different.

Study on the survival rate of foreign direct investments in the countries of the Visegrad Group using event history analysis

Foreign direct investment (FDI) is a process that starts at a point in time and may end over time or continue uninterrupted throughout the observation period. Certain economic conditions may incline investors to divest by liquidating a business entity or selling their shares in the company in which the FDIs were made. Therefore, this is an analogy with the occurrence of censored cases, which allows for the use of survival analysis tools in the examination of the duration of FDIs. The aim of this article was to compare the patterns of ‘survival’ of foreign direct investments in individual Visegrad Group countries based on the relevant tables showing ‘the duration of FDIs’ and the survival curves obtained using the Kaplan-Meier estimator according to the criteria of sector and country of origin of the foreign capital. The Cox proportional hazards model was used to model the risk of foreign divestment. Based on the results obtained, the rate of decline in the cumulative probability of FDI survival shows differences between countries; FDI survival medians also vary across countries. In particular, it is demonstrated that the highest probability of foreign direct divestment in Poland applies to projects which are approximately 13.5 to 15 years long. In Czechia, this concerns projects which are approximately 18 to 21 years old, while in Slovakia and Hungary it is projects which are longer than 21. The study also shows that in all Visegrad countries, FDIs with German capital lasted the shortest, while projects with French capital lasted the longest (in the Czech Republic, Poland, and Hungary). In the majority of the Visegrad Group countries, the highest risk of divestment is typical of projects in sectors other than industrial processing and financial, insurance and other services. The data for the computations are from the Orbis and Zephir databases.

Dynamic common correlated effects of financial inclusion on foreign direct investment: Evidence from East-Asia and Pacific countries

This research explores the dynamic common correlated effects of financial inclusion on foreign direct investment (FDI) in East Asia and Pacific (EAP) countries. Traditional econometric methodologies overlook cross-sectional dependence and heterogeneity among countries, resulting in biased estimates. As a result, we use a unique method called DCCE, which can effectively address these problems. The short run and long-run estimates reveal that financial inclusion positively and significantly influences FDI in higher-income and overall EAP countries. Furthermore, in lower-income EAP countries, financial inclusion has an insignificant correlation with FDI, which becomes significant when an interaction term for institutional performance and financial inclusion is included. Hence, governments and policy makers in EAP economies should try to increase financial inclusion in order to attain an optimal and sustainable level of FDI inflows to enhance economic growth.

Is foreign direct investment caring for sustainability? A look in African sub-Saharan countries

PurposeBusiness politics and social and economic policies in the past decades brought us to the inevitability of change. Foreign direct investment (FDI) plays a vital role in this change as it is a tool for international business management in a global world. The relationship between FDI and sustainability in sub-Saharan countries with lower incomes has not yet been sufficiently studied, so this study aims to bring some more conclusions to the discussion. Thus, the main objective is to understand if FDI effectively influences the so-called triple bottom line (TBL) pillars of sustainability.Design/methodology/approachWith data from the World Bank regarding 20 sub-Saharan countries gathered between 2010 and 2018, this study analysed 34 indicators composing 11 United Nations Sustainable Development Goals (SDGs). Afterwards, the authors grouped them by the TBL pillars and evaluated the influence of FDI inflows on their scores using panel data models.FindingsThe results show a positive and significant correlation between the TBL pillars, with the highest correlation being between the environmental and economic pillars. On the other hand, FDI has no significant influence on the TBL pillars.Practical implicationsThis study could improve foreign investment legislation/regulation in sub-Saharan African countries, potentially impacting the sustainability these investments should generate.Social implicationsThis study contributes to understanding how FDI implies sustainability. The results suggest that governments, non-governmental organisations and other competent entities need to adjust their actions in these countries so that foreign companies sustainably exploit the resources.Originality/valueThis study brings to the current arena an emerging theme: FDI and sustainability in African countries, particularly in sub-Saharan countries. This subject in developing countries is still under-researched.

Terror, Political Risk, and Effect on Foreign Direct Investment

ABSTRACT Terrorist attacks have important social, political, and economic effects. One of the effects of terrorism involves the impact on foreign direct investment (FDI). While existing research suggests that terrorism negatively impacts FDI by increasing political risks, it is unclear how the effects of terrorism are conditioned by host country institutions. Political institutions may affect investors’ perceptions of political risk following a terrorist attack by shaping expectations of future political risk. We argue that the conditional effect of institutions and terrorism is non-linear: Terrorism has a negative effect on FDI inflows to countries with a medium level of institutional effectiveness only. Using quantitative analyses of FDI flows and political risk ratings, we show that terrorism has no effect on FDI in host countries with very high or very low levels of political institutional effectiveness. In a qualitative analysis of FDI and terrorism during the civil wars in Algeria and El Salvador, we demonstrate that concerns about institutional effectiveness played an important role in producing disinvestment by foreign investors. This research contributes to the literature on the determinants of FDI, effects of terrorism and political risk, and suggests that institutions play an important role in affecting how investors perceive political risk.

How do foreign direct investment flows affect carbon emissions in BRICS countries? Revisiting the pollution haven hypothesis using bilateral FDI flows from OECD to BRICS countries

Foreign direct investment (FDI) flows from developed to developing countries may increase carbon emissions in developing countries as developing countries are seen as pollution havens due to their lenient environmental regulations. On the other hand, FDI flows from the developed world may improve management practices and advanced technologies in developing countries, and an increase in FDI flows reduces carbon emissions. Most of the existing studies examine the relationship between FDI flows and carbon emissions by using aggregate FDI flows; however, this paper contributes to the literature by analyzing the impact of FDI flows on carbon emissions in Brazil, Russia, India, China, and South Africa (BRICS) between 1993 and 2012 using bilateral FDI flows from eleven OECD countries. According to our empirical results, from which OECD country FDI flows to BRICS countries matters for carbon emissions in BRICS countries. Our results confirm that FDI flows to BRICS countries from Denmark and the UK increase carbon emissions in BRICS countries, confirming the pollution haven hypothesis. On the other hand, FDI that flows from France, Germany, and Italy reduced carbon emissions in the BRICS countries, confirming the pollution halo effect. FDI flows from Austria, Finland, Japan, Netherlands, Portugal, and Switzerland have no significant impact on carbon emissions in BRICS countries. The BRICS countries should promote clean FDI flows by reducing environmental damages, and investing countries should be rated based on their environmental damage in the host countries.

Doğrudan Yabancı Yatırım Girişlerinde Beşerî Sermayenin Rolü: ECOWAS Ülkeleri Üzerine Bir Panel Çalışması

The main purpose of this paper is to empirically investigate the role of human capital on the Foreign Direct Investment (FDI) inflows toward ECOWAS countries (Economic Community of West African States). FDI is seen as one of the most important tools that promote economic growth, employment, technology transfer and currencies’ inflows in a country. In many African countries, despite reforms implemented, FDI inflows continue to be relatively low. Many studies evaluating the main determinants of FDI in African countries have revealed that one of the most important determinants is human capital. However, in many African countries, human capital is among the least developed in the world. Therefore, an empirical analysis is conducted to investigate the role of human capital in the inflows of FDI of ECOWAS countries. For this purpose, a panel data is used for the fourteen members of ECOWAS countries over the period 1991-2015 where human capital is proxied by both adult literacy rate and degree of freedom. The empirical findings revealed that the degree of freedom is the main proxy for the human capital while the adult literacy rate is not statistically significant.