Form Of Foreign Direct Investment Research Articles

Analisis Determinan Foreign Direct Investment di ASEAN-6

FDI is one of the components that can spur economic growth. Developing countries, especially in the ASEAN region, need more capital inflows in the form of foreign direct investment. The purpose of this study is to find out what factors affect FDI in 6 ASEAN countries (Indonesia, Malaysia, Singapore, Thailand, Brunei Darussalam, and Vietnam) for the period 2010-2021. The analysis method used is quantitative analysis method with panel data method approach. Data calculations were carried out using E-views 10 and Microsoft Excel 2019. The variables used are FDI as the dependent variable, while GDP, inflation, interest rates, and trade openness are independent variables. The results showed that the coefficient of determination is 0.7566. That is, 75.66% of FDI is influenced by GDP, inflation, interest rates, and trade openness variables and the rest is influenced by other variables. The estimation results of the F statistical test show the results that GDP, inflation, interest rates, and trade openness together have a simultaneous effect on FDI in 6 ASEAN countries. The t-test found that GDP and trade openness have a partial effect with a positive value on FDI in 6 ASEAN countries. Inflation and interest rates have no partial effect on FDI in 6 ASEAN countries.

Beyond economic development? Foreign direct investment and pre-election violence

Incumbents who resort to violence in efforts to secure their hold on power have been a major challenge for sub-Saharan Africa. At the same time, opening up domestic markets to international capital in the form of Foreign Direct Investment (FDI) has provided governments with more resources to garner the support of their citizens. How are these developments related? We argue that FDI reduces the likelihood that incumbents use violence in competitive regions. FDI has direct economic benefits for the population. Especially in competitive regions, where violence might reduce turnout even among their potential supporters, incumbents thus adapt their re-election strategies and use fewer violent means. We draw on geo-referenced data on election violence, FDI, and previous election results and match these within subnational regions. Investigating subnational variation in 15 sub-Saharan African countries, we find empirical support for our argument. FDI lowers pre-election violence in competitive regions, but has no effect in both incumbent and opposition strongholds. These findings are robust to using 10×10 km and 25×25 km grid cells and have important implications for democratic countries’ foreign policies: allowing multinational companies to invest in developing countries reduces violence, but might simultaneously bolster incumbent regimes.

Efekti sektorske strukture stranih direktnih investicija na ekonomski razvoj - slučaj evropskih zemalja u razvoju

The inflow of foreign capital from multinational companies from all over the world, in the form of foreign direct investments (FDI), intensified economic dynamics and contributed to the improvement of macroeconomic performance. In certain economic sectors and activities, FDI has become the carrier of economic growth, encouraged by intensive processes of deindustrialization and reindustrialization. Namely, FDI can have both positive and negative impact on economic growth and development. This depends on the ability of the economic sectors to overcome the negative effects of FDI in a certain period of time, which can only be achieved if the sectors are exportoriented and introduce new technologies into their operations, thereby increasing productivity and competitiveness. Ordinary Least Squares (OLS) panel regression showed this was not the case in the primary and secondary sectors in the countries of Central and Eastern Europe (CEE) and the Western Balkans (WBs), which are still predominantly labor-intensive and therefore have a negative impact on economic development. As opposed to the agricultural and industrial sectors, the services, under the influence of technological progress, is profiled as a capital-intensive sector with a statistically significant positive impact on economic growth and development.

Удосконалення методики оцінки інвестиційної безпеки держави з урахуванням «кругових» інвестицій

The article discusses the features of «round tripping» investments that come to the country in the form of foreign direct investment (FDI), but in its essence is the return of previously withdrawn domestic capital abroad, mainly to offshore jurisdictions. The author suggests that there is a significant impact of «round tripping» investments on the investment security of the State, taking into account the motives of their formation and a significant illegal component, the absence of additional effects from attracting these investments into the economy. It is proposed to supplement the system of indicators of investment security of the State with the indicator «share of «round tripping» investments in the total volume of FDI (excluding reinvested capital)». To find out the directedness of the relationship between this indicator and the country’s economy, a regression analysis based on the data of 2010–2022 was applied. As a result of the analysis, a direct relationship between GDP in actual prices and GDP per capita, as dependent variables, and the share of «round tripping» investments in total FDI as an independent variable, has been identified. The article assesses the level of investment security of Ukraine in 2015–2021 taking into account the share of «round tripping» investments in the total volume of FDI (excluding reinvested income) based on the calculation of the integral indicator. The results of the calculation of the sensitivity coefficients of the integral indicator to changes in indicators testified to the largest impact of «round tripping» investments on the state of investment security of Ukraine in 2021. The carried out study confirmed the expediency of improving the methodology for assessing the investment security of the State by supplementing the system of indicators with the indicator of the share of «round tripping» investments in the total volume of FDI (excluding reinvested income).

Asymmetric effect of educational expenditure, knowledge spillover, and energy consumption on sustainable development: Nuts and Bolts for policy empirics

Climate change is raising widespread anxiety, especially in countries that are more vulnerable to environmental disasters. Energy use leads to an increase in Greenhouse gases, especially carbon emissions, which is responsible for environmental degradation. Identifying cultural and economic factors that impact sustainability courses is critical in this context for dealing with ecologically demanding challenges. Education and knowledge spillover in the form of foreign direct investment has long been seen as an effective method of disseminating knowledge, ideas, and behaviors that aid in environmental protection and improve ecological consciousness. This study investigates how energy consumption (LEC), educational expenditure (EDEXP), and knowledge spillover (KNO) affect sustainable development (SD) in the case of Pakistan. This study employs the Non-linear Autoregressive Distributive Lag Model (NARDL) over a data span of 41 years i.e., from 1980 to 2021. The estimations unveil that shocks in educational expenditure pose different results. EDEXP_POSE increases sustainability (0.807 units) while EDEXP-NEG decreases sustainability (0.931 units) while KPO_POS and KPO_NEG positively (0.200 units and 0.011 units respectively) affect environmental sustainability. On the other hand, LEC_POS negatively (1.685 units) affects sustainability while LEC_NEG positively (0.867 units) affects Sustainable growth. Energy consumption has a negative impact on sustainability; thus, the government should prioritize the production of renewable energy sources and support the spread of knowledge that is good for the environment. The government may think about putting tariffs on businesses who import non-green technology since it has a significant and advantageous impact on the environment.

Tariff cost and cross-border M&A affiliate sales: Evidence from China

Cross-border mergers and acquisitions (M&A) is a major form of foreign direct investment (FDI). In contrast to many developed countries, the majority of China’s cross-border M&As are vertical rather than horizontal. I study the difference in the reaction to tariff of horizontal and vertical M&A subsidiary sales. The baseline OLS regressions show that as export tariff cost increases, cross-border M&A affiliate sales relative to export rises, and the effect mainly comes from vertical affiliates, especially in downstream subsidiaries. The main results are robust to the Poisson pseudo maximum likelihood (PPML) regressions and an instrumental variable (IV) approach. A simple model is developed to reconcile the empirical findings when horizontal and vertical M&As co-exist in the same market and further tested at both the extensive and intensive margins. The results offer new insights to understanding the performance of M&As from developing economies.

Seventy Years of FDI Literature: Review, Comparison and Critique

Abstract International capital movement in the form of Foreign Direct Investment (FDI) by multinational enterprises (MNEs) signifies a widely researched phenomenon in comprehensive review of the FDI literature. Its vastness makes it impossible to fathom its depth, as such the paper highlights what the author considers to be mainstream theories in the domain of empirical studies on FDI. This study critically reviews (FDI) literature over a period of 70 years from 1950 to 2020 to provide a theoretical lens for future research beyond the established models. The discussion covers the mode of FDI inflows, statistical methods applied, theoretical models, contributions to paradigms and empirical papers investigating FDI. Furthermore, the papers selected cover heterogenous geographical regions, while in certain papers FDI has been studied as a dependent variable in others as an independent one. The focus lies on the FDI and its resultant activities of MNEs in the form of subsidiaries to carry out market seeking, strategic asset-seeking and efficiency seeking activities. Though, most researchers have narrowed down to four determinants of FDI i.e., motives of MNEs for undertaking FDI, size of MNEs, entry modes into host country and investments sector recently, many works have applied formal theories to provide a framework for market failure such as holdup problems, non-fulfillment of contracts and related agency costs. It is concluded that FDI has evolved into a significant area of empirical investigation. Overall, the gaps and opportunities in existing literature are identified thereby directions for further research emerge.

International taxation and the organizational form of foreign direct investment

We investigate the relation between international taxation and the organizational form of foreign direct investment (FDI). Using micro-level data on inbound FDI relations in Germany, we find that a higher tax burden on income earned in a corporate subsidiary increases the probability that a multinational corporation (MNC) conducts foreign investment through a non-corporate flow-through. This effect is economically meaningful and varies with the relative importance of tax-motivated income shifting, a subsidiary’s non-tax benefits of limited liability and legal independence, and an MNC’s local knowledge. Moreover, we examine potential real effects of organizational form choices and document that affiliates established as flow-throughs exhibit a lower loss propensity and are less profitable than affiliates established as subsidiaries. Taken together, our findings inform policy makers about the potential response of MNCs to tax-law changes and suggest that the chosen organizational form can shape the future characteristics of investments abroad.

FDI and Economic Growth – Perspective of Southeast European Countries

Abstract Emergence of new economic entities, through either integration or disintegration, always creates system inefficiencies resulting in temporary economic setbacks. At the macroeconomic level, this brings about slowdown in economic growth and delayed catching up with more advanced economies. In Europe, the turn of the century brought along political and economic disintegration, on one hand, and economic integration, on the other. Demise of planned economies across Eastern Europe caused serious economic turmoil due to market fragmentation. Meanwhile, creation of new economic architecture in the European Union (EU) has created additional challenges of economic restructuring. Therefore, achieving sustainable economic growth and high income has become the ultimate economic policy objective. Equity investment in form of foreign direct investment (FDI) has proven to be the right choice, because influx of fresh capital and know-how enabled strong economic growth and restructuring through increasing labor productivity and economic efficiency. Stronger competitive pressure through FDI contributed to dynamic restructuring, resembling in increasing exports and stronger integration into global economy. Yet, growth rates across countries were not always proportional to the volume of inward FDI, which indicates a certain level of underperformance for some countries. The aim of the paper is to closer investigate the FDI-growth nexus by differentiating between two types of FDI – mergers and acquisition (M&A) and greenfield investment. Thus, the analysis will take account of the characteristics of the FDI host economy, and those of the investing company, because we find it reasonable to assume that different forms of FDI incorporate different business dynamics and the time horizon of the investor’s expectations. In order to find out the effects of different forms of FDI on economic growth we apply panel data analysis with fixed effects and Prais-Winsten estimator on the sample of European reform countries whereby FDI, M&A and greenfield investment are considered the key variables. Analysis also includes a set of control variables, which combine standard neoclassical growth variables. Results indicate that, with reference to the level of innovativeness, different types of FDI indeed produce different effects on host countries’ economic growth.

Impact of Foreign Direct Investment on Manufacturing Sector: Evidence from Indian Economy

There is need for an additional source of finance in form of foreign direct investment (FDI) in the Indian manufacturing sector due to its long-term engagement between the investors and the host country. Further FDI in the manufacturing sector is gaining importance because of the benefits the manufacturing sector reaps as a result of technology spillover brought through FDI. Therefore the objective of the study is to assess the impact of Foreign Direct Investment on the manufacturing sector output of the Indian economy for the period of 1991–2020. Methods such as bounds test, Autoregressive Distributed Lag Model (ARDL) and Granger causality are used to study the impact of FDI and the interaction of FDI and human capital as two different variables on the output of the manufacturing sector in the Indian economy. Also, the technology-enhancing effect of FDI is addressed in the current study. The results of the study reveal that the inflow of FDI leads to an increase in manufacturing sector output. Further, it concludes that the higher the level of education (human capital) and the greater the technology gap between host and home country, the more is the technology spillover, and hence more prominent is the impact of FDI on the output of the manufacturing sector.

Impact of Economic Freedom Distance on India’s Inbound Cross-Border Acquisition Volume: Moderating Role of Economic Distance

Cross-border acquisitions (CBA) are a form of foreign direct investments and have been dramatically increasing over the last three decades. India has been one of the top CBA destinations among emerging economies, making it interesting to explore the determinants. Even though the CBA research is voluminous, the role of economic freedom is understudied. In this background, by extending the knowledge of distance measures impacting cross-border acquisition (CBA) activities, we examine the impact of economic freedom distance on India’s inbound CBA volume and the moderating role of economic distance. We used a sample of 979 observations by collecting the CBA data from Thomson’s EIKON Mergers and Acquisitions database for our study period covering 1990 to 2020. We show that economic freedom distance negatively impacts India’s inbound CBA volume. Moreover, economic distance significantly moderated their effect. These results indicate that India should strengthen its economic freedom and grow steadily to attract more CBA volume inflow. These findings have important theoretical and practical implications for multinational firms and policymakers in making emerging economies like India an attractive destination for CBA activities.

Глобальні тенденції міжнародного руху капіталу

The article examines the global trends of international movementof capital in the form of foreign direct investments, which were characteristic of the period of development of the world economy in 2011–2022, during which the world financial and economic crisis took place and the COVID-2019 pandemic spread internationally. The directions of international expansion of transnational companies are studied in view of their participation in the formation of global value chains, which consistently connected with each other in the global space the types of economic activities for the creation and promotion of products. Based on the analysis of international statistics data, clusters of countries were singled out, which acted in different years as the largest recipients of foreign direct investments and were in the circle of economic interests of large international business. Changes in the direction of foreign direct investment flows of leading transnational corporations are shown and their influence on the geographical localization of production processes within global value chains since the end of the 20th century until now is demonstrated. Special attention is paid to the examination of the forms and directions of international movementof capital in Asian countries, which hold the global leadership in attracting foreign direct investments. In the system of factors that influence the direction of foreign capital movement in the international space, a separate group of factors related to the effect of global transactional risks is singled out. The latter change the direction of foreign direct investment in the global economy and need to be taken into account in the formation of industrial policy by the governments of national economies.

Impact of Carbon Tax and Environmental Regulation on Inbound Cross-Border Mergers and Acquisitions Volume: An Evidence from India

Climate change, global warming, and carbon emission are global issues. Countries are strengthening their environmental regulations to mitigate the emission problem. According to the pollution haven hypothesis, rich countries invest in emerging economies where the institutional framework is weak to migrate the emissions. With this background, this study examines the impact of the introduction of the carbon tax in India and environmental regulation restriction distance on India’s inbound cross-border mergers and acquisitions (a form of foreign direct investment) volume using a 979 country-pair-year observation sample. The Tobit regression model findings suggest that carbon tax introduction and environmental regulation distance negatively impact India’s inbound cross-border mergers and acquisitions volume. Furthermore, control of corruption intensifies its impact by effectively moderating them. The results indicate that India can avoid becoming a pollution haven by strengthening its environmental policies and controlling corruption. These results provide insight into strengthening the policies relating to environmental regulations and continuing the efforts required to control corruption in India.

Re-assessing Pollution Haven Hypothesis (PHH): corruption, FDI and CO2 emission

In recent years, studies on the impact of international trade on environment been extensively debated. Stiff international trade market becomes a push factor for the firms to engage in race to bottom activity and therefore, firms reallocate their production plant overseas in the form of foreign direct investment (FDI). The reallocation of the production plants of firms into developing countries has causing the environment of the host countries depleting. The environmentalist claimed this scenario as Pollution Haven Hypothesis (PHH). In this study, System Generalized Method of Moments (S-GMM) is employed to address the gap in the literature with the focus on the role of corruption in PHH. With the focus of developing countries during 2002 to 2018, our result finds that PHH valid in a more corrupted country. Countries with higher level of corruption are attracting polluted FDI than less corrupted countries. The present study is imperative as it provides an opportunity to advance knowledge on the significant theoretical insights into the relationships between corruption and PHH in developing countries.

PENGARUH JUMLAH UANG BEREDAR, NILAI TUKAR, FOREIGN DIRECT INVESTMENT, DAN INDEKS HARGA PERDAGANGAN BESAR TERHADAP EKSPOR INDONESIA TAHUN 2009-2021

This study aims to determine the effect of the money supply, exchange rate, foreign direct investment and wholesale trade price index on exports in Indonesia. This study uses a quantitative approach. The method used is Error Correction Model (ECM). The data obtained are secondary data published by the Central Statistics Agency (BPS) in the form of money supply, the wholesale and export price index, the Ministry of Trade in the form of exchange rates and the Investment Coordinating Board (BKPM) in the form of foreign direct investment. The results of this study indicate that the money supply has a positive and significant effect on Indonesian exports in the short and long term. Meanwhile, the exchange rate and foreign direct investment have a negative and significant impact on Indonesia's exports in the short and long term. Also, the wholesale price index has a positive and significant impact on Indonesian exports in the short term.

Is India a pollution haven? Evidence from cross-border mergers and acquisitions

A crucial component of the combating climate change is the reduction of carbon emissions (CO2). Based on the pollution haven hypothesis, existing literature claims that to mitigate the carbon emissions, multinational enterprises undertake cross-border mergers and acquisitions (CBA), a form of foreign direct investment, in emerging economies where the regulatory institution is weak and make such host countries a pollution haven victim. In this background, we examine whether India is potentially a pollution haven for firms who prefer the CBA route by investigating the impact of the home country's CO2 emissions on CBA decisions involving the number, volume, and stake acquired in an emerging host country, India. Additionally, we use India's corruption control as an indicator of institutional factor to examine its moderation effect. We used a net sample of 796 country-pair-year observations to examine the volume and number of CBA and 3796 net deal-level data to examine stake acquisition from a gross sample of 5641 CBA data sourced from the Thomson Reuters EIKON database covering a study period from 1990 to 2020. Our results from Negative Binomial and Tobit regression models find that less carbon-emitting countries frequently undertake CBA activities with large volumes in India. Moreover, our Logit regression model results show that high emitting country firms prefer full equity control in Indian firms. Furthermore, India's corruption control makes this relationship much more potent by significantly moderating the impact of the home country's CO2 emissions on CBA decisions. These results indicate that India could become potentially a pollution haven for multinational enterprises from high emitting countries. Furthermore, we provide specific policy implications based on these results and add scientific value to the academic community, scholars, environmentalists, regulatory bodies, and policymakers.

The macroeconomic effects of import tariffs in a model with multinational firms and foreign direct investment

Recent (de-)globalization tendencies and rising protectionist measures has created new interest in studying the effects of unilateral and world-wide tariffs. This paper contributes to this issue by taking into account that international transactions in goods and services increasingly take the form of foreign direct investment. We look at the effects of import tariffs in the context of a two-region DSGE model with both an exporting and an FDI sector. We find that the tariff jumping effect on FDI is largely outweighed by a cost effect if the tariff is imposed on all imports. This holds in the case of both tariffs imposed unilaterally and worldwide import tariffs. Our analysis confirms the aggregate positive welfare effects of a unilateral tariff, but also shows inefficiencies resulting from consumption and production distortions. This leads to lower GDP and real wages through the investment channel. However, governments can generate a tariff jumping effect by exempting imports of multinationals from tariffs. This reduces negative growth effects but also lowers welfare gains since there are less tariff revenues to support consumption. In the case of a world-wide tariff, exempting imports of multinationals reduces negative welfare effects.

Implikacje dla bezpieczeństwa ekonomicznego krajowych gospodarek, wynikające z ekspansji przedsiębiorstw międzynarodowych

Purpose: Due to their economic and financial potential, international enterprises influence other entities of foreign and international economic policy, in particular international organizations and the national economy of host countries. The article presents this influence from the point of view of the problem of economic security and independence of national economies. Hence, its main goal is to try to define the effects of activities of international enterprises from this perspective. The article focuses in particular on the aspects of the influence of foreign capital, including FDI, on the economic security of national economies. Hypothesis: The increasing dynamics of the inflow of foreign capital may lead to a decline in the country's economic security. Methodology: The methodology of professional literature analysis, the monographic-descriptive method and the analysis of statistical data from UNCTAD databases, IGCC and GUS were used. The study period is 2010–2021. Findings: The conducted literature research allows us to state that in the modern world, economic security is not only related to socio-economic progress and development opportunities of individual countries, but also to security threats resulting from the influence of the international environment, including the functioning of transnational corporations, which have a significant economic force. On the other hand, taking into account empirical research and the assessment of the situation from the perspective of economic security, it can be indicated that there is a relatively weak degree of dependence of the Polish national economy on foreign capital (despite the increase in the inflow dynamics) in the form of foreign direct investment. However, this conclusion cannot be made taking into account the global perspective and the dynamically changing geopolitical and economic situation. Implications for theory and practice: The increasing activity of transnational corporations in international markets is the source of extensive contemporary scientific discussion. Problems are also caused by the precise definition of the relationship between the corporation and other participants in international relations, as well as the diagnosis of the manifestations of their impact on the international environment, including the global political sphere and the politics of the host country, as well as its national economy. Originality and value: The article attempts to assess the impact of the expansion of international eneterprises on the economic security and independence of the national economy of the host country.

The Vulnerability of a Small, Open Economy in A Situation of Global Fiscal Crisis: The Impact of the Greek Debt Crisis on the Foreign Direct Investments to Macedonia

The objective of my research is to critique the International Monetary Fund (IMF) stance on foreign investment and the benefits for small, open economies of allowing the free movement of capital. In my research as a whole I will explore the extent to which this stance impacted upon and influenced the economic policies of Macedonia. This will involve providing a contextualized, critical account of the policy of the IMF focusing on a comparison of its policies during the early 2000s through policy documents, political discourse and enacted policies in Macedonia. The conditionality associated with these policies, such as the enforcement of austerity measures (including cutting public spending and reducing debt) and the privatization of public institutions has provoked strong reactions in countries which receive such loans (Goldstein et al., 2003; Feldstein, 1998). Moreover, the main aim of the policies and the lack of in-depth analysis on the levels of development of the economies involved has had devastating outcomes in the past (such as with the East Asian currency crisis [1997/8], Latin American – Argentinian crisis [2001], Ex-Soviet Union crisis [1998], Eurozone crisis [2007/8]) (Lal, 1987; Goldstein et al., 2003; Joyce, 2003). My focus in this research is on exploring how the process of Financial Liberalization (FL) of the Macedonian economy affected capital flows in the form of foreign direct investments (FDI) in the private sector and how the recent Greek crisis of 2008 has impacted on this. According to Barnett and Monastiriotis, the neighboring countries (Albania, Bulgaria, Macedonia and Serbia) in which Greece is either the first or the second largest direct investor, are ‘most vulnerable to negative spillover through reduced FDI flows’ as Greek-owned FDI accounts for 7-9% of the GDP of those countries (2010: 47). In the case of Macedonia, the reality of FL was tested by the collapse of the Greek economy. The first part of my research will critically evaluate simplified models used in previous research to explain the influence of crisis on FDI in small economies like Macedonia. I will argue that investigating the impact of FL is much more complex and cannot be explained by linear regression. Instead, by undertaking an in-depth documentary analysis of official reports and documents, I will seek to investigate how the official view of the benefits of FL impacted on the Macedonian economy, thus implicitly testing the accepted IMF position.

International Migration: The Nexus Between Security and Migration of African Migrants

African migrants play a very important role in the wholesome development of both host and countries of origin. Their role to development comes in the form of foreign direct investment, remittances, transfer of technology and technical skills, societal development among others. However, the process through which African migrants migrate, their security from their home countries, through their journey and in their host countries are largely ignored especially by the government of their countries of origin. The article reviews existing literature on international migration. It aims to describe the nexus between security and international migration through an African perspective. This was done with focus on migration theories, pathways of international migration, human security of Africa and the difference between forced and voluntary migration. Concepts of international migration and human security are also discussed.