Terms Of Foreign Direct Investment Research Articles

Development of the country's innovative potential as a factor in attracting foreign investment

The purpose of the paper is to study and analyze the role of developing the country's innovative potential to attract foreign investments. The main results of the study are to obtain information that in addition to the innovative environment, ideology, politics, economy and culture of the country, foreign investors often pay attention to intellectual, scientific, technical and technological, financial, legal and entrepreneurial resources, which generally includes into the components of the concept of “innovation potential”. Countries that have been investing heavily in research and development on an ongoing basis for a long time are leaders in the ranking of countries in terms of foreign direct investment. Based on the data presented in the study it can be concluded that the development of the country’s innovative potential is an important factor for foreign investors. The novelty of the scientific work is justified by the current of globalization, since it is the global economy that makes innovation even more important since companies and investors are looking for prospects for growth and competitive advantages. There are many related studies, but there are no studies on innovation potential in the context of attracting foreign investment.

Drivers of bilateral FDI inflows in North Africa region: a gravity model approach

Purpose- This paper aims to explore the main determinants of bilateral foreign direct investment (FDI) and investigate the relationship between bilateral trade and FDI inflows in five North African countries with 25 investment partners. Methodology- The study employs a gravity model and pooled time-series-cross-sectional regression method, utilizing a 10-year average over the period 2001-2010, the significance of this research lies in its contribution to the existing literature as the first study to analyze the factors influencing bilateral FDI inflows between North African countries and their primary investing partners. Findings- The results indicate that bilateral trade, economic size, financial development, and common language of host countries are key drivers of bilateral FDI inflows between North African countries and other nations. Furthermore, the presence of a common language between host and home countries has a significant and positive impact on bilateral FDI. However, the distance between host and home countries has a negative effect on FDI. Conclusion- This paper concludes that foreign direct investment (FDI) between North Africa and other nations was influenced positively by the economic sizes of both the home and host countries while being negatively affected by the physical distance between them. Additionally, the results demonstrate that the presence of a common language and bilateral trade play crucial roles, with their effects being highly positive and significant. This suggests that FDI flows tend to be greater between North African countries and those with whom they already have substantial bilateral trade transactions. Furthermore, the study concludes that France, the United Arab Emirates, Spain, and Kuwait are the most significant investing countries in the North African region in terms of FDI, surpassing other nations. Keywords: Bilateral FDI inflows, bilateral trade, gravity model, North Africa, geographical and culture factors. JEL Codes: F14, F21, F40, F30, F15

Environmental regulation and outward foreign direct investment: evidence from Chinese firms’ overseas mergers and acquisitions

ABSTRACT While the literature shows that stricter environmental regulations deter exports and inward foreign direct investment (FDI), few studies examine the impacts on outward FDI, especially for developing countries. In this paper, we analyse this issue in the context of China, which is the largest developing country in terms of FDI. We collect the transaction-level data of all the overseas mergers and acquisitions (M&As) by Chinese firms from 2000 to 2019. For the identification of the causal effect, we exploit the implementation of the Environmental Protection Law in 2015 as a quasi-natural experiment and carry out the difference-in-difference-in-differences analysis (DDD). The results show significant impacts of stricter environmental regulations on outward FDI. When the provincial emission reduction target increases by 10% points, the number of overseas M&A transactions in the high-polluting industries has increased by 32 every year since 2015. Moreover, the investments are more likely towards countries with better environmental protection. This suggests that firms aim at gaining cleaner technologies via M&As rather than transferring pollution abroad.

Determinants of High-tech Exports: New Evidence from OECD Countries

AbstractHigh export capacity is a key element for sustained long-term economic growth. To achieve this goal, the technological sophistication of exports plays a key role. To enhance exports with a high level of technological sophistication, it is critical to target key drivers of high-tech exports. Hence, this article studies the determinants of international trade flows of manufactures according to their technological content in the case of OECD countries. Given a panel of 35 countries and 15 years (2004 to 2018), panel data estimation techniques are used in the analysis. In addition, two alternative measures have been considered to measure the importance of high-technology content manufacturing exports: High-tech manufacturing exports and high-tech manufacturing exports as a share of total employment. Results obtained show strong evidence of the relevance of variables such as gross fixed capital formation on total employment, the land area per capita, the percentage of university graduates relative to the population group, R&D expenditure in terms of GDP, the stock of inward foreign direct investment in terms of GDP, imports of high-tech manufactures as a share of GDP, the quality of national governance and regulation, the country population and EU membership as determinants of technology-intensive exports. Moreover, the findings have significant implications for trade and industrial policies in OECD countries, to ensure the effectiveness of policies targeting the technological upgrading of exports.

Populism and FDI Location Choice

In this study, we investigate how populist governments influence the location choice of multinational enterprises (MNEs) in terms of foreign direct investment (FDI). We also examine how experience of MNEs acts as a contingency in this relationship. With a sample of 525,688 observations on FDIs from 2007 to 2019 we find that MNEs are less likely to invest in a country the more its government is considered populist. More internationally experienced firms that already have invested in the target country and that have experience with populist governments are less deterred from uncertainties of populist governments. Overall, our results highlight the specific uncertainties populist governments cause for MNEs’ location choice and that experienced MNEs can better deal with them.

Being an emerging economy: To what extent do geopolitical risks hamper technology and FDI inflows?

This paper evaluates the impact of geopolitical risk (GPR) on total factor productivity (TFP) and the inflows of foreign direct investment (FDI) for a group of 18 emerging economies between 1985 and 2019. Based on Granger causality panel data tests, we show that the trajectories of these variables cannot be neglected to explain one another. To account for cross-equation influence, we estimate seemingly unrelated regression (SUR) models and uncover a significant and robust negative impact of GPR on TFP and FDI. Counterfactual simulations provide a quantitative approximation of GPR’s impact in 2015–2019, which is substantial in terms of TFP growth but small in terms of FDI. For the emerging economies to consolidate their economic progress, geopolitical stability is essential.

Foreign direct investment, economic growth, and unemployment: Evidence from developing countries

High unemployment is one of the major difficulties confronting most modern countries, putting social, economic, and political strain on policymakers. Foreign direct investment (FDI) is critical to a country’s economic development, particularly in transitional economies. FDI is a major source of capital inflows to developing countries. FDI affects the level of employment in the host country, in addition to its many other effects. The research is based on the studies of Johnny, Timipere, and Krokeme (2018) and Zeb, Qiang, and Sharif (2014) that have examined these variables in this paper. This study investigates the relationship between FDI, economic growth, and unemployment to quantify and assess the relationship in selected developing countries or Western Balkans countries according to these variables. Data for the developing countries of Western Balkan were collected in the observed period 2015–2019. Differences between countries were explored in terms of FDI, gross domestic product (GDP), and unemployment using the data produced from the one-way analysis of variance (ANOVA) test. According to regression analysis, FDI and GDP have a considerable impact on country unemployment. The results showed that FDI and GDP have an effect in decrease unemployment in the developing countries examined.

Causal effect between balance of payment and foreign direct investment in oil and gas sector in Nigeria

The study examined the effect of balance of payment on foreign direct investment on the oil and gas sector in Nigeria. The study used ex-post facto research design and the population is made up of 5 oil and gas foreign investors in Nigeria. The sample size is the 5 oil and gas foreign investors. The study relied on reports from Central Bank of Nigeria for secondary data. The study employed various procedures in analysing the data such as correlation matrix, unit root test, co-integration and vector error correction model. The study found that causality ran from balance of payment to multinational corporations in Oil and Gas sector in Nigeria in terms of foreign direct investment which implied that balance trade openness caused increase in the inflow of FDI in Oil and Gas sector of Nigeria. This implied that balance of payment attracted more inflow of FDI in Oil and Gas sector in Nigeria. The study recommended that balance of payment policy in Oil and Gas should be formulated to encourage inflow of foreign direct investment in the sector in Nigeria. Government of Nigeria should seek for the assistant of Organization of the Petroleum Exporting Countries (OPEC) to direct investors in Oil and Gas to refine the oil and gas in Nigeria without exporting the raw material to their home country.

Retrospective analysis of foreign investment in the context of the evolution of economic theories

The article provides a retrospective analysis of the formation and evolution of foreign direct investment in terms of various economic theories taking into account changes in the stages of socio-economic development. The study of these historical and economic issues was carried out using systematic analysis and historical method; which allowed us to identify the genesis and analyze the evolution of economic theories on the formation and development of foreign direct investment. The author conducted a detailed study of the history of investment activities and management of foreign direct investment from the oldest origins in the ancient world to modern forms of innovation. It was found that at different times, repre- sentatives of various economic theories (open economy, market modernization, monopolistic competition, international capital movements, etc.) worked on under- standing complex investment processes, risk management and methods of obtaining economic benefits, who considered foreign direct investment as a guaranteed im- provement and development of society. The analysis of scientific literature and statistics shows positive social, po- litical, economic, technological and other effects of investment activities: job creation and training, export diversification and improvement of export perfor- mance, introduction of science-intensive technologies, activation of local firms – suppliers and subcontractors, the introduction of effective management methods, foreign exchange inflows, etc. Analyzing the genesis of economic theories, opinions and research, we conclude that humanity, feeling the need for savings, pays considerable attention to investment. The stages of the investment economy and the choice of methods of control over them indicate the urgency of this problem, and today scientists continue to discover new aspects of investment opportunities and develop innovative forms, mechanisms, tools of investment policy. Key words: economic theories, foreign direct investment, investment activity, international capital movement.

An Empirical Analysis on the Effects of Corruption, International Trade, and National Income on Inward Foreign Direct Investment

Purpose - The study centers on how corruption, national income, and international trade volume can give an impact on a nation’s performance in terms of Foreign Direct Investment (FDI). Design/Methodology/Approach - We used the data of Foreign Direct Investment (FDI) using Corruption Perception Index(CPI) from 217 countries and inward FDI using Panel Regression Analysis such as the Fixed Effect Panel Model and the deviation from mean model. Findings - As the empirical results of this study, the members of the OECD and EU corruption did not give the significant impact on their inbound FDI. However, there were correlations between corruption and FDI for the developing nation in ASEAN and UNASUR. In further development of globalization, corruptions of each nation are no longer domestic issues but are rather shared by the world, including neighboring countries. Research Implications - Global investors are calling for a higher level of transparency from investment destinations. Nowadays, the developing country’s effort to root out corruption has become a prerequisite condition to beef up its economy.

Sino-Bulgarian Economic Relations in the Post Pandemic World

Since 2013, China has launched the “Belt and Road” Initiative adhering to “The Five-Connectivity Program”, which aims at achieving win-win results with the countries along the road. Meantime, “17+1” mechanism is an important regional platform that promotes cooperation between China and Central and Eastern European countries. In this context, the Sino-Bulgarian economic relationships are constantly expanding and increasingly diversified in terms of foreign direct investment, trade, and cooperation of companies. There are increasing research interests and results of these two policies but there are still a lot of gaps to fill. The most pressing one is that more researches are needed about the impact of the Belt and Road Initiative and “17+1” mechanism on Central and Eastern Europe Countries, especially an individual country such as Bulgaria. Bulgaria was the second country that recognized and established diplomatic relations with China in 1949. Since then, Bulgaria and China have established a very good and strong relationship in different ways. However, the outbreak of COVID-19 in 2020 has brought many challenges for both Bulgaria and China, which has a deep impact on the bilateral economic relations. herefore, by searching the past ten years of SSCI literature in the database, this paper systematically sorts out the existing research on Sino-Bulgarian economic relations and makes a comprehensive review, reflecting the latest and changing landscape of the Sino-Bulgarian economic relations. Then by collecting, screening and analyzing the latest statistical data in multiple sources, this paper identifies the characteristics of FDI, the bilateral trade respectively. The purpose is to provide a guidance of the prospect of Sino- Bulgarian economic relations in the future. The paper establishes that the economic relations between the two countries have made great progress under this initiative and new mechanism but still remain unstable and far below their potential. Finally, the paper concludes that there is a very promising future for the bilateral economic relations even facing many challenges and risks in the post pandemic world.

МІЖНАРОДНІ РЕЙТИНГИ ТА ОБСЯГИ ПРЯМИХ ІНОЗЕМНИХ ІНВЕСТИЦІЙ: ВЗАЄМОЗВ’ЯЗОК ПОКАЗНИКІВ

The purpose of the study is to identify the relationship between the values of major international rankings and the volume of foreign direct investment for 20 leading countries in involvement FDI. The following rankings were examined: the index of ease of doing business, international and global ratings of competitiveness, the index of economic freedom, tolerance for corruption. Analysis of the places occupied by Ukraine in the relevant rankings. The statistical processing of information on 20 leading countries in terms of foreign direct investment and the corresponding place of these countries in the main international rankings, the use of the correlation method to identify the relationship between these indicators, methods of analysis and synthesis, comparing the level of foreign direct investment with the corresponding values of known international indices. In addition, countries were classified into three different groups depending on the relationship between the values of the main international ratings and of foreign direct investment. Another research method was the abstract-logical method to find new additional factors that determine the investment attractiveness of countries. The analysis of the relationship between the inflow of foreign direct investment and the corresponding place of the studied countries in the main international rankings did not show a significant dependence. At the same time, it was found that a number of countries that hold leading positions in attracting the highest volumes of foreign direct investment have correspondingly high-ranking positions in international indices. However, this sample of countries turned out to be the smallest. The largest number was the sample of countries, it was half of the list of countries for which there is no correlation between the volume of foreign direct investment and the rating values in major international indices. The analysis showed a fairly close relationship between the volume of foreign direct investment, on the one hand, and the size of the country, which is characterized by GDP and population, on the other hand. However, in our opinion, international ratings should not be ignored in general: achieving high places in international rankings to some extent forms a positive investment image of the country, and ignoring the results of ratings can lead to financial isolation of the country. At the same time, the study of new factors that cause the desire to make foreign direct investment in a country is a very interesting object of further research.

Trade under Global Value Chains in Africa (Lessons from Asia)

A global value chain refers to a globalized manufacturing process in which the tasks for manufacturing the final product are differentiated and performed in different countries. Due to the high transport and coordination costs, globalized production in Africa is very rare. Most of the goods were made in the country or simply in a workshop. Tackling trade in global value chains is on the high-level political agenda of African countries. Despite trading among global value chains, there is a heated debate as to why some African countries are making progress in global markets and others are not. Some authors have noted that Asia has played an important role and performed well within global value chains. The purpose of this article is to understand the importance African countries place on the global value chain and also to explain why trade has succeeded in African global value chains and why some African countries are unable to interact with global value chains. Despite Asian lessons. The data used in this study was collected through 100 questionnaires and six semi-structured and open interviews with managers of African exporting organizations. For quantitative research, a systematic random sampling method was used to select respondents, while respondents were used for qualitative research. SPSS version 21.0 was adopted for the analysis of quantitative data, while the method for reducing qualitative data. The results show that there is no clear understanding and usual meaning for global value chains. Some African countries are now ranked in Africa in terms of foreign direct investment by the United Nations Conference on Trade and Development (UNCTAD) according to the World Investment Report (2018). Keywords: Global Value Chains, Africa, Asia, Trade, manufacturing. DOI: 10.7176/JESD/12-4-03 Publication date: February 28 th 2021

Foreign Direct Investment And Macro Variables: 2010-2019 An Implementation For Turkey

Among the factors of production, the most needed factor in developing countries is capital. Capital transfer between countries has become very important with the acceleration of globalization. In this context, it is seen that developing countries focus more on foreign direct investment in terms of their economic development. In this study, the relationship between foreign direct investment and consumer price index, indicator interest rate, GDP and trade openness ratio which are thought to affect these investments are analyzed for Turkey's case, as of the last decade between the first quarter of 2010 and the fourth quarter of 2019. According to the empirical findings, it was found that the variables were cointegrated in the long term, in other words, the variables were related to each other in the long term and moved in the same direction.

DETERMINANTS OF ASSETS GROWTH OF FOREIGN OWNED BANKS IN INDONESIA

The aim of this research is to assess the dominant factors enabling foreign owned banks to increase their assets in Indonesia and to confirm whether the “follow the customers hypothesis” is also applicable in motivating foreign owned banks to do business in Indonesia to support investment and trade activities of the companies originated from foreign countries. Using the panel data of 28 foreign owned commercial banks in Indonesia between 2006-2015 obtained from Indonesian Banking Directory, Indonesian Banking Statistics databases, foreign country central bank websites, a least square dummy variable (LSDV) regression model was applied to examine the effect of Bilateral Trade, Foreign Direct Investment (FDI), Interest Rate Differences, Domestic Deposits, Parent banks Return on Assets (ROA) and Length of Time presence of the foreign owned banks in Indonesia on Assets or Size of Foreign Owned Banks. The main findings is that the decisions by foreign owned banks to operate and to expand its business in Indonesia is predominantly affected by the increase in realization of projects funded by Foreign Direct Investment from counterpart countries, third parties fund or domestic deposit denominated in foreign currencies, profitability of the parent banks in home country and long time presence in Indonesia to enable parent bank and their branches or subsidiaries gain better operating experience, better general managerial expertise and better knowledge of local environment. Bilateral Trade and Interest Rate Differences between home and host country has no impacts at all on Assets of Foreign Owned Banks. “Follow the customer hypothesis” is applicable in Indonesia only in terms of FDIs but not applicable in terms of bilateral trade. The findings will help management of the banks in designing more reliable business plan and also used as input or tools for policy makers prior issuing the license for the newly open foreign owned banks offices or increase of its branch offices. It is suggested foreign owned banks to consider empowering its trade financing scheme which will increase the banks size or assets.

India-Japan Trade : A Review

India and Japan have a strong trade partnership, where Japan ranks in top five investors in terms of Foreign Direct Investment (FDI) in India. This investment has injected funds into many developmental projects, helping India in strengthening its infrastructure and resource base. However, after exiting the Regional Comprehensive Economic Partnership (RCEP) in 2018, India had a major trade agreement with Japan and South Korea namely, the Comprehensive Economic Partnership Agreement (CEPA). This paper is an attempt to study the mutual benefit claim in International Economics, taking the case of India and Japan. The paper aims to review the (1) Japanese Investment in India and (2) the Trade Opportunities due to CEPA.

PENGARUH ALIRAN MODAL ASING TERHADAP PERTUMBUHAN EKONOMI DI ASIA

ABSTRACTCapital account liberalization possibly promotes growth. However, the policy is considered a source of crisis. This study examines the effect of foreign capital inflows, in terms of FDI (Foreign Direct Investment) and FPI (Foreign Portfolio Investment), on economic growth and examines the determinants of capital flows to selected Asian countries over the 1998-2017 period. Based on the Two-Stage Least Square result, higher USA growth rates and lower interest rate differential are push factors of FDI, while domestic economic growth is a pull factor of FDI and FPI. The long-run FDI positively and significantly affects growth, whereas FPI has a negative but non-significant effect. The result indicates that an increase in growth can boost FDI inflows thereupon leads to higher growth. Keywords: economic growth; capital flows; liberalization

Summary of the Paper Entitled: Forecasting Fuel Prices with the Chilean Exchange Rate

This draft is a summary of the paper entitled: Forecasting Fuel Prices with the Chilean Exchange Rate. In that paper we show that the Chilean exchange rate has the ability to predict the returns of oil prices and of three additional oil-related products: gasoline, propane and heating oil. The theoretical underpinnings of our empirical findings rely on the present-value theory for exchange rate determination and on the strong co-movement displayed by some commodity prices. The Chilean economy is heavily influenced by one particular commodity: copper, which represents nearly 50% of total national exports and attracts a similar share in terms of Foreign Direct Investment. As a consequence, the floating Chilean exchange rate is importantly affected by fluctuations in the copper price. As oil-related products display an important co-movement with base metal prices, it is reasonable to expect evidence of Granger causality from the Chilean peso to these oil-related products. We find substantial evidence of predictability both in-sample and out-of-sample. Our paper is part of a growing literature that in the recent years has explored the linkages between commodity prices and commodity currencies.

The impact of the Turn to the East Policy on foreign direct investment in the Russian Far East

This study aims to measure the effectiveness of Russia’s Turn to the East Policy, addressed by the federal government in 2012, on the economic development of the underdeveloped Far Eastern regions, in terms of foreign direct investment (FDI) inflows data. To do so, this paper analyzed the results of the representative policy mechanisms - designed to promote the Far Eastern investments - of the Turn to the East Policy, comprised of the Eastern Economic Forum (EEC), Advanced Special Economic Zones (ASEZs), and Vladivostok Free Ports (VFPs), based on the secondary data from the governmental organizations. From the study, in spite of the previous contentions on those policy mechanisms amongst policymakers, we elucidate the incremental growing FDI - majorly contributed by the East Asian countries: China, Japan, and South Korea - propensity in the Far East. The three Eastern Asian countries promote investments in the Russian Far East for different eco-political purposes. And it further analyzed that for Russia, despite the remarkable magnitude of Chinese and Japanese FDI compared to South Korea, South Korea is still the most attractive partner, in terms of lack of threats: The Chinese expansionism, and the Kuril Island dispute with Japan.

Growth Effects of Foreign Direct Investment (FDI) From China and Other Sources in Africa: The Role of Institutional Quality

This study examines the effects of Foreign Direct Investment (FDI) from China, United States (US), European Union (EU) and the rest of Asia on economic growth conditional on the institutional quality of sub-Sahara Africa for the period (2003-2012). We develop theoretical argument from the existing literature to show that institutional heterogeneity may be one of the description for mixed findings of previous empirical studies on the growth effects of Chinese FDI in Africa. We use rule of law to proxy for institutional quality. Using Panel Threshold Regression (PTR) model, we show that FDI from all these sources have a positive impact on growth only above certain thresholds of rule of law and these thresholds differ from one source to the other. However, for FDI from China and the rest of Asia, the difference is marginal. That is, the growth effect of FDI from Asia is positive in countries with governance rating of at least -0.89 while negative in countries falling within a range of -1.35 and -0.89. In terms of FDI from EU and US, beneficial outcomes on growth are realized in countries with governance rating of at least -0.90 and -0.62, respectively. These results confirm that China and the rest of Asia do invest in both weak and strong governance countries in sub-Sahara Africa although the impact is different. Whereas, US and EU seem to invest only in strong governance African countries. However, the former is more sensitive to institutional quality than the latter.