Global Foreign Direct Investment Research Articles

The Effects of Governance Type and Economic Crises on Foreign Direct Investment Inflows in Ghana

Global foreign direct investment (FDI) flows have increased rapidly over the last few decades. However, Ghana has not attracted much of this FDI. Investors are driven mostly by profit maximization and hence decisions to invest in an unfamiliar territory are often based on the economic and political conditions of this new territory. The current study investigates the effect of the state of governance and economic crises on FDI inflows to Ghana. Using time series data from 1960 to 2015, Vector Error Correction Mechanism results show that democratic governance has the tendency to positively influence FDI inflows while periods of economic crises are likely to reduce FDI inflows to Ghana in the long run. Depreciation of the Ghana Cedi reduces FDI inflows but market size has a positive influence on FDI inflows. Increase in labour skills and the level of openness have positive effects on FDI inflows. In the short run, economic crises in the last three years have negative effects on present FDI inflows while democratic governance in the past year positively influences FDI inflows. It is recommended that democratic governance should be maintained to enhance FDI inflows. Also, efforts to avoid economic crises especially institutional shocks absorbers are key to maintain FDI inflows to Ghana. JEL: P33, P45, E02, O55

Cross‐border expansion and competitive interactions of indigenous mobile network operators in sub‐Saharan Africa

Emerging‐market multinational enterprises (EMNEs) have become major players in the global economy, with an increasing share of global foreign direct investment (FDI). Indigenous mobile network operators (MNOs) in sub‐Saharan Africa (SSA) are not left out in this pursuit, as they seek growth and competitiveness beyond their domestic markets. We investigate the FDI location choices and competitive interactions of the five indigenous SSA MNOs that had internationalized as of 2014 and find that, contrary to the literature, these EMNEs, operating in a key and rapidly developing industry, did not tend to commence their cross‐border expansion in geographically close markets. In addition, the MNOs are more likely to invest in countries with stronger control over corruption and do not appear to engage in heavy head‐to‐head competition with their rivals. These findings contribute to the internationalization literature in the context of the investment and competitive behaviors of the currently underexplored indigenous SSA multinationals.

Capital Account Liberalisation by China and the Effects on Global FDI and Trade

We model the partial liberalisation of the capital account by China using a dynamic computable general equilibrium model of the world economy. Our results indicate that a reduced capital controls on foreign direct investment (FDI) would lead to a significant increase in FDI capital in China and a significant reduction in the cost of capital in China relative to the rest of the world. Furthermore, we observe an increase in capital stocks in most regions, which benefits most regions in terms of GDP and GNP. The Chinese economy grows by 3.3% driven by a significant fall in the rental price of capital that, in turn, lowers domestic costs, causes a real depreciation of the exchange rate and thus increased exports relative to other regions. We also observe an across-the-board increase in the saving rate driven by the rise in the price of consumption relative to investment (saving) in all regions.

Place, space, and foreign direct investment into peripheral cities

Perspectives drawn from the economic geography literature are increasingly used to generate insights into locational issues in international business. In this paper, we seek to integrate these literatures further by investigating the locational determinants of foreign direct investment (FDI) into peripheral cities within an emerging economy. Peripheral cities in emerging economies are attracting a growing proportion of global FDI flows, but the international business literature lacks a framework for understanding subnational determinants of FDI, particularly into non-core locations. We draw on the core-periphery model to build and test theory on how spatial interdependencies between subnational locations impact on the distribution of FDI inflows into a large and heterogeneous country China. Our results show that whilst peripheral cities tend to have a negative effect on FDI, this effect is positively moderated by proximity to core cities. The results highlight the importance of considering interactions between place and space when investigating locational issues in international business.

Zavisnost ekonomskog razvoja Srbije od toka stranih direktnih investicija

The aim of the paper is to identify, based on the analysis of relevant theoretical findings, the effects of foreign direct investment (FDI) on economic development and export growth of the Republic of Serbia. First, the characteristics of global FDI flows are presented. What follows is the analysis of FDI flows in the Republic of Serbia in the period from 2006 to 2016, and assessment of their real long-term effects. Finally, the relationship between FDI and export of the Republic of Serbia is examined.

Global production networks and foreign direct investment by small and medium enterprises in ASEAN.

This paper examines cross-border investments by small and medium enterprises (SMEs) from member states in the Association of South-East Asian Nations (ASEAN). It explains this relatively under-researched topic from the perspective of SMEs’ strategic coupling with or “plugging into” regional production networks coordinated by global lead firms. Facilitated by growing regional integration, these SMEs create and capture significant value added from their involvement in these production networks. The paper first highlights the different drivers of SME-specific FDI activities in ASEAN that contribute to strengthening regional economic integration through intra- and inter-firm activities in the region. The paper then explains the working of their strategic coupling with ASEAN-based production networks through different coupling mechanisms, such as international partnership, industrial specialization and production platforms. The key challenges confronting SME regionalization are highlighted. Finally, the paper considers the policy and practice of promoting SME regionalization so that they can plug into the growth dynamics of different regional production networks.

The Shifting Landscape of Global Foreign Direct Investment: Emerging Patterns

This presentation examines changes in global foreign direct investment (FDI) flows and stocks in the past quarter of century (1991–2016) for countries and territories for which data are available. It also asks how those changes affect our way of explaining FDI and other activities of multinational enterprises (MNEs), and draws basic public policy conclusions from the evolving landscape of FDI and our understanding about the main driving forces behind those changes.

The determinants of foreign direct investment in sub‐Saharan Africa: What role for governance?

AbstractFor the past quarter of a century, foreign direct investment (FDI) flows have grown exponentially across the world. Sub‐Saharan Africa has, however, lagged behind and only lured on average a mere 2 per cent of global FDI. The investment that the region attracts tends, moreover, to be concentrated in a number of commodity‐rich countries. Natural resources and the size of national markets have generally been considered as the main drivers of FDI. The quality of local institutions has, by contrast, attracted less attention. This paper uses institutional data for 22 countries in order to demonstrate that the quality of governance plays a far from negligible and enduring role in the distribution of FDI in sub‐Saharan Africa. It is shown that factors such as political stability, government effectiveness, lower corruption, voice and accountability, and the rule of law not only are more important determinants of FDI than the size of local markets, but also that their influence on the capacity of African countries to attract FDI is long‐lasting.

FDI Inflows Influence Merchandise Exports? Causality Analysis for India over 1991-2016

The deepening waves of globalization since late eighties and the growth in the international integrated production networks (IPN) over the past decade have significantly increased both Foreign Direct Investment (FDI) and merchandise trade flows. India, whose share in global FDI inward stock and global merchandise exports have increased from 0.08 percent to 1.13 percent and 0.51 percent to 1.60 percent over 1989–2015 respectively, is no exception to this trend. The current paper attempts to explain the influence of FDI inflows on India’s exports through a time series analysis with quarterly data over the period 1990–91 (Q1) to 2015–16 (Q4) in the presence of multiple structural breaks. The empirical analysis indicates that while exports influence FDI inflows, the reverse is not true in the Indian context. The result underlines the fact that FDI inflows in the country may primarily be targeting the growing domestic sectors, rather than utilizing the domestic resources for reaching the world market.

International trade and foreign direct investment: empirical testing of the trade–environment triangle

The debate on growth and development has largely been argued during the seventies and eighties over the world. Subsequent to the eighties and nineties, the concern shifted towards the global environment through the emphasis on pollution and other forms of environmental degradation. Thereafter, the entire development debate has been revisited from the point of view of trade, development and the environment. The existing literature, however, is both incomplete and uncomplicated in as much as it does not relate these three vital dimensions of the trade–environment debate with each other. This paper attempts to verify empirically the triangle consisting of the Environmental Kuznets Curve (EKC), the Pollution Haven Hypothesis (PHH) and the type of economic development. EKC challenges the intuitive dichotomy between development and environment whereas PHH emphasises the implications of global foreign direct investment for the environment. The findings are in accordance with the new literature, which forms the basis of the trade, environment and economic development triangle at the global level.

Emerging Trends of Foreign Direct Investment in Developing Asian Economies with Special Reference to India

There has been a dramatic shift in the attitude of developing countries towards FDI in recent years. Most of the developing countries have adopted a much more favourable view of Foreign Direct Investment (FDI) inflows. Globalisation exposed the markets of developing countries to foreign shores. In this paper an attempt has been made to study emerging trends of FDI inflows in developing Asian economies from the year 1990 to 2015. Regional Distribution of FDI at global level and FDI policy reforms in India has also been highlighted. Study revealed that developing countries are growing at relatively faster rate than developed countries. Changes in international regulatory environment have helped in gathering momentum of FDI inflows in the developing Asia where a steady rise in FDI inflows has been witnessed due to existence of comparatively sound macroeconomic environment required for attracting the FDI inflows.

The Global FDI Network: Searching for Ultimate Investors

This paper addresses three types of geographical decoupling in foreign direct investment (FDI), i.e., challenges when using traditional FDI data as a proxy for real economic integration between economies: (i) large bilateral asymmetries between inward and outward FDI, (ii) the role of special purpose entities (SPEs), and (iii) the effect of moving from immediate counterpart to ultimate investing economy (UIE). A unique global FDI network is estimated, where SPEs are removed and FDI positions are broken down by the UIE. Total inward FDI in the new network is reduced by one-third, and financial centers are less dominant.

The Global FDI Network: Searching for Ultimate Investors

This paper addresses three types of geographical decoupling in foreign direct investment (FDI), i.e., challenges when using traditional FDI data as a proxy for real economic integration between economies: (i) large bilateral asymmetries between inward and outward FDI, (ii) the role of special purpose entities (SPEs), and (iii) the effect of moving from immediate counterpart to ultimate investing economy (UIE). A unique global FDI network is estimated, where SPEs are removed and FDI positions are broken down by the UIE. Total inward FDI in the new network is reduced by one-third, and financial centers are less dominant.

FDI and Growth of Service Sector in India

In the contemporary globalised economy, service sector attracts the major share of Foreign Direct Investment (FDI) in the world. India being a part of this phenomenon also attracts most of its FDI in the service sector. The present paper highlights the trend in FDI movement in the world in general and India in particular. Further, it reviews the FDI policy in India in the post liberalized period. The growth of FDI in services sector may be attributed to the changing pattern of global FDI and also the liberalization and globalization policies pursued by India. Since 2000, the high inflow of FDI has resulted in the growth of new services viz., financial and non-financial services, telecommunication, computer software and hardware, hotel and tourism, construction activities and real estate. The growth of services sector had led to the growth of export of services from India which now accounts the majority of export from the country.Keywords: FDI, Services sector, Export, Liberalization.

ATTRACTING FOREIGN DIRECT INVESTMENTS: THE CASE OF LATGALE REGION

Recent theoretical and empirical studies show that foreign direct investment (FDI) is crucial for sustainable development of countries and regions. The various discussions among the regional development institutions in Latvia on the importance of improving the environment for successful attraction of foreign investments have been initiated, as well as new strategic initiatives are in the process of development. The aim of the paper is to analyse the latest trends of inward FDI flows in Latvia and Latgale region in the context of global FDI trends. To attain the aim, the global FDI trends, the inward FDI flows in Latvia and Latgale region, as well strategic framework of Latgale region for attracting FDI were analysed.

Internationalising Smart Specialisation: Assessment and Issues in the Case of EU New Member States

Smart specialisation is currently probably the largest innovation policy experiment in the world. Its aim is to move the EU less developed countries and regions on path of R&D-based growth. This transformation requires not only endogenous knowledge and technology accumulation building but also coupling with international knowledge and production networks. Yet, internationalisation does not seem to be a crucial component in the design and development of Research and Innovation Strategies for Smart Specialisation (RIS3), which are at odds with the strong dependence of the EU New Member States (EU-13) on FDI and global value chains. Our analysis is grounded in the key ‘stylised facts’ related to EU-13 R&D&I activities, and the complex link between innovation and internationalisation. Innovation systems in the EU-13 are fragmented and based on largely public R&D systems and on predominantly production-oriented foreign direct investment (FDI). This structural weakness calls for stronger support for innovation-oriented activities and for the integration of global value chains (GVCs) and FDI into local innovation systems. We explore the main obstacles to the internationalisation of smart specialisation and discuss ways to overcome them. We highlight the policy action areas related to providing support for technology upgrading in relation to the internationalisation of smart specialisation.

Inward Foreign Direct Investment and Economic Development: A Global Perspective

The economic basis of globalisation lies in multilateralism where the intended impact is allocative efficiency. So, it can be said about foreign direct investment (FDI) that multilateralism implies importing capital from a variety of sources as may be most efficient rather than restricting them to a bilateral basis. This forms the motivation of this paper. This paper has used principal component analysis (PCA) and panel regression approaches. The study builds up a methodology for measuring and testing the determinants of the patterns of global inward FDI. These determinants are a large set of developmental variables. The study evolves a set of six composite indices by using of PCA, namely human resource, infrastructure, labour, market, trade openness and resource. The results establish certain basic principles of FDI theory in terms of efficiency-seeking FDI, resource-seeking FDI and market-seeking FDI.

Foreign Direct Investments and Economic Growth: The Primary Drivers

<p>In order to achieve the Global Millennium Development Goals (MDGs) there is need for enhanced global partnerships in areas such as trade, health, security, environmental sustainability, food security and education. Owing to these initiatives Foreign Direct Investments (FDIs), Official Foreign Development Assistance (ODAs) and other external capital flows are increasingly considered as drivers of economic growth for developing countries. By year 2000 FDIs flow to developing countries accounted for 19% of the total global FDI flow compared to 52% in 2010. Collectively FDI equates to 11% of global GDP and generates close to 80 million jobs globally. Global FDI totaled to US$ 1.2 trillion in 2010, US$ 1.4 trillion in 2011 and US$ 1.8 trillion in 2012. Similarly, the developing countries received half of the FDI and only invested a quarter of the FDI out flow. Studies show that FDIs contributes to economic growth by stimulating several macro-economic and demographic variables which are major agents of economic growth. This paper sought to explain the effect of FDI on the determinants of economic growth human capital development, financial sector development and trade openness. A sample of 30 African countries was used for the study. The data used was retrieved from UNCTAD and World Bank online databases for the period between 1980 and 2012 and analyzed through a fixed effect regression model. The results of the study show that FDI had a positive impact on measures of financial sector development and trade openness. However the effect of FDI on human capital development was negative. The study recommends the need for favorable monetary policies that elicit more FDI for enhanced economic growth. The study also suggests increased global trade liberalization and integration to boost trade. Finally the study recommends that additional FDI flows should be directed towards human capital development. </p>

Emerging Market Multinationals: Coopetition for Global Growth

Since the dramatic geopolitical shift toward liberalization in the last century, emerging-market multinational enterprises (EMNEs) have become major players in global markets and continue to account for an increasing share of global foreign direct investment (FDI) flows. Given this trend, the questions of how and why EMNEs pursue FDI deserve greater attention. This article builds on recent work that uses resource dependence theory (RDT) to explain EMNE internationalization strategies. We propose that EMNEs, while often resource deficient relative to their developed-market competitors and, therefore, more dependent on others in the external environment, are uniquely positioned to overcome these deficiencies over time through simultaneous cooperation and competition—coopetition—with their global rivals and host- and home-country governments. These propositions contribute to the EMNE internationalization literature by more fully incorporating RDT into current theories of internationalization, highlighting the importance of managing dependencies over time to maximize global growth. © 2015 Wiley Periodicals, Inc.

Motives as Locational Determinants: A Study of FDI between India and LAC

This paper addresses the issue of motives as locational determinants of foreign direct investment (FDI) flows from India to the Latin American region. India and the Latin America and Caribbean (LAC) have emerged as important centers of global FDI but have traditionally had insignificant FDI flows between them. The paper is a pioneering study examining motives of the newly emerging FDI relationship between India and the LAC region. The study uses a firm level data base across seven countries and multiple industries in an augmented gravity framework. It contributes to the literature on emerging markets as it concludes that FDI flows from India to the LAC are both asset seeking and asset exploiting, bridging the gap between traditional and modern explanations of FDI. Using a negative binomial regression model the study establishes that FDI flows dominate from the information technology and pharmaceutical industries and are market-seeking for nearshore advantages to the USA and strategic asset seeking for patents and technology