Level Of Foreign Direct Investment Research Articles

Determinants of Foreign Direct Investment: An Empirical Study for Major Countries

This paper aimed to measure the determinants of Foreign Direct Investment (FDI) in countries that are leaders in attracting foreign capital. Drawing from empirical literature, economic and institutional variables that influence the level of FDI in selected countries were identified. Using a panel data approach, the significance of these variables in determining FDI inflows in these economies was estimated. The results indicate that variables such as GDP, trade openness, exchange rate, corruption control, interest rate, imports of goods and services, and country risk are significant drivers of FDI for the selected group of countries.

Sectoral Composition of Outward FDI and its Impact on Export Diversification in Saudi Arabia

This research explores the relationship between outward foreign direct investment (FDI) and export diversification in emerging economies, with a focus on the case study of Saudi Arabia. Utilizing a multi-equation model and vector autoregression analysis, the study investigates various factors such as the level and sectoral composition of outward FDI, income levels, institutional factors, and regional trade agreements. The findings suggest that while outward FDI can influence export diversification, its impact varies based on factors such as the sectoral distribution of investments, income levels, and institutional quality. Additionally, cointegration and vector error correction models reveal long-term relationships among key variables, highlighting the complex interplay between economic development, governance, and investment patterns. Impulse response analysis sheds light on the dynamic nature of shocks and their effects on the economy over time, emphasizing the interconnectedness of variables. Variance decomposition analysis further elucidates the significance of shocks in explaining fluctuations in model variables, underscoring the systemic interdependencies at play. Overall, the study provides valuable insights into the mechanisms through which outward FDI influences export diversification and economic development in emerging economies like Saudi Arabia and institutional reforms are essential; strengthening institutions and improving regulatory frameworks can amplify the positive effects of outward FDI on export diversification.

Foreign Direct Investment and New Quality Productivity of Enterprises

Now China is opening up to the outside world at a high level. In the process of utilising foreign investment, it is significant to study how foreign direct investment (FDI) affects the formation of new quality productivity of enterprises in China. This paper examines the impact of FDI on new quality productivity of enterprises. Results using financial statement data of A-share listed companies and FDI level data of the cities where the companies are located from 2011 to 2020 show that FDI has a significant promotion effect on the enhancement of new quality productivity of enterprises. Further analysis reveals that the positive effect is generated through the channels of improving enterprise innovation ability and easing enterprise financing constraints, predominantly observed in non-state-owned enterprises. The test for moderating effect shows that a high degree of capital market openness has a significant positive effect on the formation of new quality productivity of enterprises influenced by FDI. The results of this paper provide a theoretical perspective of FDI for further research on the new quality productivity of enterprises.

Penanaman Modal Asing dan Penyerapan Tenaga Kerja di Provinsi Jawa Barat

Purpose – This research aims to analyze the influence of foreign direct investment (FDI) on labor absorption in West Java Province.
 Methods – Panel data from districts/cities in West Java in the 2017-2021 period were obtained from the Central Statistics Agency. Panel data regression analysis was carried out using the fixed effects method.
 Findings – The results of the analysis show that FDI has no effect on labor absorption in the West Java. In this research, it was found that labor absorption was influenced by education variables and gross regional income (GRDP) variables.
 Implication – The impact of FDI on labor absorption cannot be overstated. However, there is a possibility that it will take a long time for foreign investment to have an effect on labor absorption.
 Originality – Research on foreign investment in the province with the highest level of FDI in Indonesia on employment is still very rare to find. Moreover, this research utilizes panel data which statistically has advantages compared to cross-section or time series data alone.

IMPACT OF LEGAL AND REGULATORY QUALITIES ON FDI INFLOW: A COMPARISON OF DEVELOPED AND DEVELOPING COUNTRIES

The objective of this research is to determine the impact of legal and regulatory qualities on foreign direct investment (FDI) inflows and explore its impact in developed and developing countries, comparatively. The sample comprises data on FDI inflows from 66 countries, spanning the period 2008 to 2021. To estimate the regression parameters, the quantile regression with fixed effects model proposed by Machado and Santos Silva (2019) was employed. Additionally, the regression results were supported using random effects and fixed effects models with Driscoll-Kraay (1998) standard errors. The results of the quantile regression analysis reveal that legal and regulatory qualities have a positively significant effect on FDI inflows. This impact is greater in developing countries than in developed countries, and the discrepancy increases with higher FDI levels. These findings hold important policy implications for decision-makers. To attract FDI, particularly in developing countries, it is crucial to strengthen legal systems by safeguarding property rights, establishing contractual certainty, and implementing effective dispute resolution mechanisms. More so, efforts should be taken to reduce rent-seeking behavior and prevent powerful groups from receiving unfair advantages. Failure to address these issues may increase the risks and impede a country's economic development in the long run.

Corruption distance discourages bilateral FDI … Unless you’re high: The moderating effect of direction

This study investigates the impact of corruption, corruption distance, and corruption direction on bilateral foreign direct investment (FDI) outflows using reporting OECD Global North and Global South countries. We first posit that corruption and the absolute difference in corruption levels across a pair of countries are negatively related to a host country's level of FDI. Then we investigate the moderating effect of direction when investing in a more corrupt host country. A PPML gravity model for a panel of 5733 different North and South country pairs over the years 1998–2018 indicates both the presence of corruption and a high corruption distance between country pairs has negative effects on FDI outflows, but investing in the direction of a more corrupt host country has a positive moderating effect. Our results contribute to expand and complement the theories on corruption in FDI.

Impacts of Political Risk and Macroeconomics Factors Towards Foreign Direct Investment in Developing Countries

This study examines the relationship between macroeconomic factors and foreign direct investment (FDI) inflows in developing countries. The data from the World Bank covers 21 years, from 2000 to 2020 was analyzed using the panel regression approach with E-Views. Panel regression analysis, including model selections and diagnostics, is used for inferential analysis. The main contribution of this study is the influence of political factors on FDI inflows. Political stability and corruption control are technically the most important conditions for FDI inflows in developing countries and were introduced in this study. This study found a positive relationship between GDP growth rate, imports, inflation, and corruption index with FDI inflow, confirmed by previous studies. The study also implies that the exchange rate, exports, and political stability have a negative relationship with the level of FDI in developing countries. In addition, the study found that GDP growth rate, imports, and exports significantly impact FDI inflows in developing countries, while the other variables are not significant. In other words, this result shows that macroeconomic and political factors such as import, export, exchange rate, corruption control, and political stability impact FDI inflows. Moreover, this paper provides policy recommendations to support developing countries' economies by attracting FDI and increasing its inflow.

The Influence of Foreign Direct Investment on Physical Health of Rural-Urban Migrants—Empirical Evidence from China Migrants Dynamic Survey

The purpose of this study is to explore the influence of Foreign Direct Investment (FDI) on rural-urban migrants' physical health and its influencing mechanism. A total of 134,920 rural-urban migrant samples are matched based on the China Migrants Dynamic Survey in 2017 and the China Urban Statistical Yearbook in 2016. On the basis of the samples, a Binary Probit Model is used to explore the relationship between the degree of FDI and rural-urban migrants' physical health. The results show that compared with migrants who lived in cities with a lower FDI level, rural-urban migrants who lived in cities with a higher FDI level are better in physical health. The results of the mediation effect model show that the degree of FDI has a significant positive impact on employment rights and benefits the protection of rural-urban migrants, improving rural-urban migrants' physical health, which means employment rights and benefits protection plays an intermediary role in the process of FDI affecting rural-urban migrants' physical health. Therefore, when formulating public policies such as plans to improve the physical health of rural-urban migrants, not only the availability of medical services for rural-urban migrants needs to be improved, but the positive spillover effect of FDI should be taken into account. By doing so, FDI can positively affect the physical health of rural-urban migrants.

New Insights for Revealing the Effect of FDI on Pakistan's Economic Growth: Evidence from the Auto Sector

FDI is one of the important pillar for the development of economic sectors and industries for promoting the high growth of valuable products and improve the quality of useful industrial products. However, as a result of globalization, a country's economic development is no longer completely reliant on its own resources. The foreign direct investment (FDI) made by multinational corporations improves the quality of life for locals by creating employment for them and raising their level of living. FDI may have both positive and negative effects on the expansion of the economy, depending on the factors. South Asia's leading liberal economy is Pakistan. Pakistan permits 100% foreign ownership in its secondary industry due to its open economy and fast-paced private sector. Pakistan's tertiary sector has seen a sharp growth in FDI inflows when compared to other economic sectors. Pakistan's primary sector of the economy is characterised, like other emerging countries, by poor productivity, inefficient labour, energy deficits, and less incentives. However, it seems that the incentives and other variables have only had a modest impact on Pakistan's FDI levels in recent years. The economic development of Pakistan is negatively impacted by foreign direct investment. FDI has a significant influence on Pakistan's short- and long-term economic development.

Chinese FDI in Poland and the Czech Republic – inflows, determinants and challenges

Purpose: The objective of this paper is to present Chinese investment flows and the nature of participation, to analyze the differences between host countries, and to identify the determinants of Chinese FDI in Poland and the Czech Republic. Design/methodology/approach: Comparison of the specifics of Chinese direct investments in Poland and the Czech Republic. Findings: The nature of Chinese investment in Europe is changing. After years of being dominated by mergers and acquisitions, Chinese investment in Europe is now more focused on greenfield projects. In 2021, greenfield investments reached €3.3 billion, the highest ever recorded, and accounted for nearly one- third of all Chinese FDI. More recently, the volume of Chinese FDI in Europe has reached the level of European FDI in China (now constrained by restrictions and risks). It matched the level of FDI by Chinese companies in the United States before declining over the past two years, generally due to Covid-19 and the war in Ukraine. Chinese economic presence in Europe can be divided into three areas based on size, destination, and type of acquisition: The core of Europe is formed by the three major target countries (Germany, UK, France), where more capital-intensive investments are made, followed by other Western European countries (EU-15). The new member states (NMS), which joined the EU in 2004, 2007 and 2013, as well as the Western Balkan countries in the process of accession, are associated with China in the 16+1 format (with the exception of Kosovo) and form another gateway to Europe. Due to fewer market opportunities, they receive less direct investment, but China is building infrastructure (ports, highways, railroads) - segments of the Silk Road that will bring Chinese products to mature EU markets (Richtet, 2019). It is unlikely that Chinese investment in Europe will recover in 2023. The Chinese government is expected to maintain strict capital controls, financial retrenchment, and Covid-19 restrictions. The war in Ukraine and the expansion of regulations to monitor and control Chinese investments in the EU and the UK will cause additional difficulties. Originality/value: The article could be an attempt to answer the question of combining macroeconomic and institutional factors to better understand the internationalization of firms (Dunning, Lundan, 2008). There is no doubt, that the Covid-19 pandemic and the war in Ukraine made it necessary to deepen the study of the phenomenon of FDI, its inflows, determinants, and related challenges in a turbulent world. Keywords: foreign direct investments (FDI), People's Republic of China, Czech Republic, Poland, international relationships. Category of the paper: Research paper.

Trade and Foreign Exchange Liberalization, Investment Climate, and FDI in the MENA Countries

Despite some progress in economic policy – in macroeconomic stability in the 1980s, and in structural reforms in the 1990s – the MENA countries have failed to attract foreign direct investments (FDI). This may be due to several factors. In this paper we empirically verify from a panel of 72 countries – among which are 8 MENA economies – that, during the 1990s, the low level of trade and foreign exchange liberalization compared to East Asia and Latin America played a determinant role in the low level of total FDI in the MENA economies, particularly in manufacturing. The paper also highlights the role of other factors, such as physical infrastructure, political environment and macroeconomic conditions, in explaining total FDI flows to the different regions. These results stress the importance of accelerating the pace of reform in the MENA economies.

Foreign Direct Investments in Poland against Countries of Visegrad Group

In the period of scarcity of investment capital, foreign direct investment (FDI) is an important source of its acquisition. These investments flow to the host countries in various conditions and consequences for the economy. The concept of linking the country’s position in terms of inflow and outflow of foreign direct investments with its economic development is the concept of the investment and development path – IDP (The Investment Development Path). The article diagnoses changes in the value of foreign direct investment in Poland against economies of Visegrad Group in 1995-2020, taking into account the effects of the pandemic on changes in FDI flows in 2016-2021. Against this background, the development of the Polish economy was diagnosed in the light of the path theory (IDP). The analysis covers the years 1995-2020 and 2016-2021 and uses data from UNCTAD and the World Bank. In the periods selected for the analysis, one can notice definitely different dynamics of changes in the value of FDI liabilities. The reaction of foreign investors in selected location markets varied during the pandemic. The diversification of the cumulative value of FDI receivables for individual countries is significant. During the pandemic, investors reacted to the situation in different ways. Among the selected countries, an increase in the value of FDI undertaken abroad was recorded in Slovakia and the Czech Republic. Polish investors and investors from Hungary made investments with lower values than in 2020. In all years, NOIP for Poland takes negative values, so the level of FDI undertaken in Poland exceeds the level of investments undertaken abroad. Identifying the transition to one of the most important stages on the IDP path – stage III is difficult. It is debatable to determine the period in which Poland entered such a stage. This results, among others, from low FDI. It is indicated that this is a period from 2004 to even 2013.

An Evaluation of Karachi Export Processing Zone: A Preliminary Investigation

The literature on EPZs shows that these are a second-best solution compared with generalised countrywide reforms, but that, where countrywide reforms are difficult to implement, they can be a useful weapon in the development arsenal [World Bank (2001)]. EPZs have been instrumental not only in increasing exports but also attracting export-oriented foreign direct investment (FDI). China is a classic example to be mentioned here where the levels of FDI have gone up massively over the last ten years. Added up with exports increase are also the benefits of employment generation, development of backward and forward linkages and strengthening the industrial base. The phenomenon of export-processing zones (EPZs) is a part of broader context of structural changes in global economic development. During the last few decades, there has been a tremendous increase in exports of manufactured goods especially from developing countries. EPZs have emerged as an important channel of export generation, especially of manufactured goods, from most of the developing countries e.g. East Asia, Mexico, Morocco etc. Their significance cannot be undermined because of the location-specific advantages and infrastructure facilities possessed by them.

Organized Crime and Foreign Direct Investment: Evidence From Criminal Groups in Mexico

How does organized crime affect foreign direct investment (FDI) in developing countries? Some research examines the effects of crime, such as homicide rates, on FDI. However, we know little about how organized crime in particular might affect such investment. This paper examines organized crime and FDI in Mexican states between 2000 and 2018. This case is important because Mexico is one of the top global recipients of FDI. At the same time, criminal violence has killed hundreds of thousands of people in Mexico in recent years, and scholars seek to understand the violence’s wider effects. We explain how organized crime competition, as opposed to crime generally, should shape investors’ decisions. Analyses using original data on criminal organization territory find that higher numbers of criminal groups are associated with lower levels of new FDI. Other measures of crime, such as homicide rates or crime rates, are not associated with foreign investment.

FORMATION OF MACROECONOMIC INDICATORS UNDER THE INFLUENCE OF MICE-TOURISM

The international tourism industry faces a wide range of unique challenges, the solution of which will make it possible to revive the functioning of the industry and offset the unique scale of turbulence in 2022. In our opinion, in modern conditions a proven and effective tool is activation and development of services in the structure of MICE tourism. An analysis of modern scientific research on the effectiveness of the development and functioning of international tourism suggests that there is a wide range of unresolved issues that require additional analysis. The analyzed materials of scientific research allow to draw a conclusion about the indisputable influence of the tourist business on the formation and development of the economic potential of the region at the macro-levels. At the same time, tourism is in close interaction with the geographical, economic, innovative, ecological component. The dynamics, pace and nature of this interaction is affected by a wide range of determinants, which under certain conditions that under certain conditions set the vector and level of influence of tourism business on the overall potential of the region. Specialization and concentration in the production process ensures the sustainable development of the business entity and increases its level of competitiveness in its segment of operation. Differentiation according to the specialization in the provision of tourist services by type will allows to more fully reveal the potential of a particular tourist destination. The purpose of our research is to determine the impact of international MICE tourism on the formation of macroeconomic performance indicators of the region, namely the gross domestic product (GDP) and foreign direct investment (FDI). Using the methods of correlation-regression analysis and dispersion analysis, a close relationship between the number of MICE-tourism events and the level of GDP and FDI was established. For analysis, the top 10 leading countries in business tourism events were selected; data for 2017-2020 were processed. European countries are the leaders in conducting business tourism events (51% of the total volume). In second place, by a large margin (17% of the total volume), are the countries of North America. The study of indicators of the dynamics and structure of international business events by topic for the period 2017–2020 revealed the top five: medicine, technology, science, education, industry, social sciences. The results of the study have showed that the indicators of the number of conducted MICE-events in the region and the level of economic effect from their implementation are directly proportional to the level of GDP and FDI attracted in the region. In addition, it was established that such a region as China stands out from the general trend.

Gender-, Age- and Educational Attainment Level-Specific Output–Employment Relationship and Its Dependence on Foreign Direct Investment

This paper analyses the gender-, age- and educational attainment level-specific output–employment relationship and its dependence on foreign direct investment (FDI). The unbalanced panel covers 25 European Union countries’ data from 2000 to 2020. Empirical estimations are made using the pooled OLS estimator. The impact of FDI on gender-, age- and educational attainment level-specific output–employment elasticities is estimated by including the multiplicative terms between gross domestic product (GDP) and FDI in regression models. The main results indicate the positive impact of economic growth on employment, with the highest output–employment elasticities for males and youth regardless of gender. The estimation results also indicate limited abilities of economic growth to increase the employment of highly educated people and females older than 25 years regardless of their educational attainment level. Our results suggest that higher FDI level in the host countries is mostly associated with the decreasing employment reaction to economic growth. Although FDI is an important factor affecting the output–employment relationship, it does not help to solve the problem of unemployment in the EU, especially for youth.

The Impact of the Belt and Road Initiative on the National Governance Level--Evidence from the Countries along the Belt and Road

The Belt and Road Initiative is the Chinese approach to improving global governance. Based on country-level panel data, the paper analyzes the promoting effect of the Belt and Road Initiative on the governance of countries along the route by using difference in difference method. First, our study finds that the implementation of the Belt and Road Initiative has significantly improved the governance level of the countries along the route, and this finding remains robust after a series of tests. Second, the mechanism study finds that the Belt and Road Initiative improves governance in Belt and Road countries by influencing Chinese outward foreign direct investment (FDI) and Internet penetration in the countries along the route. Finally, the moderating effect suggests that the Belt and Road Initiative has a more significant impact on governance in countries that are closer to China and receive more official development assistance. Further heterogeneity analysis reveals that the governance promotion effect of the policy is more pronounced for countries with lower levels of economic development, population density, merchandise trade, and FDI.

The Impact of the Belt and Road Initiative on the National Governance Level--Evidence from the Countries along the Belt and Road

The Belt and Road Initiative is the Chinese approach to improving global governance. Based on country-level panel data, the paper analyzes the promoting effect of the Belt and Road Initiative on the governance of countries along the route by using difference in difference method. First, our study finds that the implementation of the Belt and Road Initiative has significantly improved the governance level of the countries along the route, and this finding remains robust after a series of tests. Second, the mechanism study finds that the Belt and Road Initiative improves governance in Belt and Road countries by influencing Chinese outward foreign direct investment (FDI) and Internet penetration in the countries along the route. Finally, the moderating effect suggests that the Belt and Road Initiative has a more significant impact on governance in countries that are closer to China and receive more official development assistance. Further heterogeneity analysis reveals that the governance promotion effect of the policy is more pronounced for countries with lower levels of economic development, population density, merchandise trade, and FDI.

The institutional determinants of outward foreign direct investment

Abstract This study focuses on the influence of institution quality on foreign direct investment (FDI) outflows. For empirical estimation, we use a dataset covering 102 home and 67 host countries from 2001 to 2016. We use the gravity approach and apply the Poisson pseudo maximum likelihood method to derive unbiased estimates. A set of institutional variables in a country is integrated into a single institutional index using principal component analysis. Our main findings are the following. First, we only identify a positive influence of the level of institutional development on FDI outflows for the institutionally developed countries. Second, we have not found evidence for crowding out national investment in the countries with weak institutions. Third, increases in the level of institutions stimulate horizontal rather than vertical outward FDI in an economy. Finally, institutional distance negatively affects the level of outward FDI only when the institutional distance between the two countries is large. The policy implications of this research are strongly in favour of further developing institutions.

A dynamic view of environmental regulation influence mechanism on manufacturing agglomeration-a case study of the Yangtze River Delta city cluster.

Rapid development and agglomeration of manufacturing industries in China inevitably lead to serious environmental pollution problems. The government restrains development of manufacturing industries through environmental regulation policies, but this may affect manufacturing industries agglomeration. Therefore, studying the impact of environmental regulation (ER) on manufacturing agglomeration (MA) is a critical prerequisite for the sustainability of China's manufacturing industry. Based on the panel data of 41 cities in Yangtze River Delta (YRD) region of China from 2003 to 2017, this paper explores the threshold effect of ER on MA using a panel threshold model and analyzes the heterogeneity impact of ER on MA in different regions and analyzes the dynamic mechanism and contribution of each influencing factor on MA using a panel vector autoregressive model. The results show that (1) there is a double threshold effect of ER on MA, showing an inverted "U"-shaped effect of rising and then falling; there are threshold effects of ER on MA based on foreign direct investment (FDI) and economic development level (EDL). The effect of ER on MA has the threshold effect under different FDI and EDL level, in which the effect based on FDI shows an inverted "U" shape relationship of rising and then falling; the effect based on EDL shows a growing trend. (2) There are 29 cities in YRD region in the "weak regulation" or "strong regulation" stage, both of which are not conducive to MA. (3) ER has a facilitating effect on MA, but with the extension of forecast period, this facilitating effect turns into an inhibiting effect. MA is mainly influenced by itself and transportation conditions (TC). Our study can provide some insights for improving the ecological environment and promoting the development of manufacturing clusters in YRD region.