Foreign Direct Investment Location Research Articles

Design of Foreign Investment Risk Model Based on Computer Big Data Technology

The location of foreign direct investment is one of the frontier issues of modern location theory research. Using discrete-time survival analysis methods that can control for multiple lifetimes and unobserved heterogeneity, this paper examines whether foreign-invested enterprises defined in different ways in China have "free-flow" characteristics. Then this paper establishes a multi-objective optimization model of venture capital. At last, this paper proves its feasibility and effectiveness with an example. This model can comprehensively and comprehensively evaluate the economic benefit and risk size of the venture capital scheme and help to make correct decisions.

Directional financial and knowledge distances and foreign direct investment location choice: The moderating role of entry mode

Directional financial and knowledge distances and foreign direct investment location choice: The moderating role of entry mode

Effect of Precipitation on Location Choice of Foreign Direct Investment in China

This paper studies the effect of precipitation on the location of foreign direct investment (FDI) based on city-level data of China from 2003 to 2018. The results show that precipitation has a significant promoting effect on the regional agglomeration of FDI. This indicates that FDI location selection is more inclined to use the dilution ability of precipitation for pollution to reduce environmental costs, rather than relying solely on water resources. Further analysis shows that the preference of FDI enterprises on precipitation in the eastern region is significantly lower than that in the central and northeastern regions. This reflects the trend that FDI enterprises gradually shift to regions with a low degree of environmental regulation to reduce environmental costs. Therefore, the efforts made by economically developed cities to improve the regional ecological environment may be offset by the location adjustment of FDI enterprises, and precipitation has become an important stimulus for the location transfer of FDI enterprises.

Research on the Influencing Factors, Location Selection and Risk of Chinese Foreign Direct Investment ——Based on the Empirical Analysis of 52 Countries along "The Belt and Road"

In this paper, we analyzed the data of 52 countries along “The Belt and Road” by applying the panel random effects model, and explored the influencing factors of Chinese foreign direct investment location choice, and on the basis, analyzed the risk of Chinese foreign direct investment. The empirical results show that the quality of labor force in the host countries, the investment in fixed assets, the degree of opening up, the participation in the multilateral and bilateral mechanisms, and the bilateral relations have a significant facilitating role on Chinese foreign direct investment. However, the degree of industrialization in the host countries and the distance between Beijing and capitals of other countries have a negative effect on Chinese foreign direct investment. In order to enhance the competitiveness of Chinese multinational investment enterprises and effectively prevent the risks of output foreign investment, we should take the following measures: Government, industry, university and research institutions should mutual collaborate, and strengthen the research on countries along “The Belt and Road”; We should develop and maintain good bilateral relations with countries along “The Belt and Road”; We should improve Chinese export credit insurance system and improve the level of risk protection.

Inward Foreign Direct Investments (FDI) and Location Choice Determinants: Empirical Evidence from India

The main purpose of this research was to determine the nature of the relationship between inward FDI flow into India and selected sets of FDI location determinants. The paper also investigates the exact impact of the individual FDI location determinants on inward FDI flow into India. Following these objectives, eight variables relating to the inward FDI locational advantage theory were selected, with data running from 1965-2018. The investigated location determinants for inward FDI include tax, market size (GDP), a measure of market potential (GDPPC), human capital (education), wage cost, Ease of Doing Business (DB), and measure of economic progress (GDP growth). The method of data analysis involved the application of OLS regression, taking note of the necessary assumptions for the use of OLS. The results of the study indicate that GDP growth is the only significant FDI location determinant in India, with a positive impact of about 0.57. This implies that the Indian government should prioritise policies that seek to boost GDP

Governance, Once Removed: Shareholder Rights Effectiveness vs. Expatriate Deployment

We investigate the impact of host-country shareholder rights protection on location and governance modes of Japanese foreign direct investment (JFDI). Agency theory predicts that strong shareholder rights protection in host countries should not increase location attractiveness nor impact entry and governance mode decisions, as foreign shareholders are outside the jurisdiction of host country laws. However, informal institutional mechanisms, including managerial bonding and isomorphic pressures, as predicted by institutional theory, may create indirect control over host country managers which reduces agency costs. Hence, we predict that higher shareholder rights protections will enhance a potential host country’s JFDI attractiveness, and that subsidiaries established in host countries with higher shareholder rights protection will employ fewer Japanese expatriates. We find support for our predictions based on a sample of JFDI established between 1986 and 2012.

The determinants of foreign direct investment: what about the potential of the Arab Maghreb countries?

Purpose The purpose of this paper is to elucidate the main determinants of foreign direct investment (FDI) in the case of the Arab Maghreb countries. Design/methodology/approach We employ a dynamic panel analysis using the General Method of Moments for a sample composed of 105 countries over the period 1985–2018. Findings We show that FDI stability, market size, higher education enrolment, quality of institutions, distance, sharing of common border, and bilateral investment and integration agreements are the main determinants of FDI location. These determinants are neither general. The potential for attracting FDI from AMU countries is poorly exploited. FDI to the AMU is lower than estimated stock. The observed FDI to potential FDI ratio does not exceed 87%. France and Spain are the main investors in the AMU region thanks to historical and cultural links. The FDI from the United States, Canada, Germany, Belgium, and Japan are below what is expected. Originality/value The contribution of this paper is observed on the examining oh the determinants of the FDI in the Arab Maghreb countries. Our study demonstrate that the political stability can decrease investment risk in these countries. The administrations correspondingly require expanding their rules and strategies with union demonstrations which were at the beginning of the departure and closing of several foreign companies.

Do institutional risk preferences exist in Chinese direct investments in ASEAN countries? A case study of Chinese-funded enterprises in Laos

PurposeInstitutional factors play an important and complex role in Chinese outward foreign direct investment (OFDI) location choices that do not seem to be influenced by a host country’s high political risks. Moreover, the location choice for OFDI is key to corporate strategic decision-making on internationalization. Therefore, this study aims to examine the direct investments of Chinese multinational enterprises (MNEs) in Laos.Design/methodology/approachCombining the purposive sampling strategy and snowball sampling method, the authors interviewed nine market- and resource-seeking Chinese enterprises in Laos. Drawing from the mainstream eclectic paradigm and the theory of new institutional economics, the authors analyzed two key variables – enterprise investment motivation and enterprise heterogeneity.FindingsChinese MNEs are not insensitive to the regressive institutional quality of host countries; the relationship effect and institutional distance are the location decision pathways along with which institutional factors influence Chinese multinationals’ investments in Laos; political stability is necessary for Chinese-funded enterprises to invest in Laos and the degree of corruption is an overestimated institutional preference factor.Originality/valueThe relationship effect is introduced into the analysis framework as an intermediate variable that influences the decision of MNEs to invest in countries with underdeveloped institutions. It verifies the significant roles of bilateral political relations and network relations in the OFDI location decisions of state-owned and private enterprises, respectively.

Motives for Inward Foreign Direct Investment into Thailand: A Quantitative Analysis

This study aimed to formulate a conceptual framework regarding the Foreign Direct Investment (FDI) location choice made by corporations and identified the motivational factors of the FDI location choices. The framework and associated hypotheses were empirically tested in Thailand. The framework was derived from existing FDI literature and consists of market, resource and efficiency seeking motives as well as institutional factors and general macroeconomic indicators towards the FDI location choice in Thailand. The objective of this research was to extend the understanding of FDI location decisions and hence provide more informed recommendations to Thai policy makers and business practitioners, as well as contribute significant knowledge to academic literature about the most influential determinants for FDI location choice in Thailand. The approach was a quantitative analysis as this provided an overview of the determining factors of FDI inflows into Thailand. Data from a number of companies was collected by using a questionnaire. In order to ensure the reliability of the proposed survey, quantitative techniques such as Cronbach's Alpha and Item-Objective Congruence were applied. Furthermore, descriptive statistics and a multiple linear regression analysis were used to determine the influence of the independent variables obtained from the conceptual framework of this research study. The research study identified that macroeconomic indicators, market-seeking motives and efficiency-seeking motives have a significant positive influence towards the FDI location choice of Thailand. Notably, resource-seeking motives and institutional factors did not have a significant influence. To the best of my knowledge this research study contains no material previously published or written by another person except where due reference is made in the text of the examinable outcome.

Bilateral investment treaties and foreign direct investment: Evidence from emerging market firms

Bilateral investment treaties (BITs) help developing countries attract foreign direct investment (FDI) from developed countries. However, whether BITs matter for emerging market firms’ (EMFs) FDI is unclear. This paper investigates how BITs affect EMFs’ FDI locations using conditional logit models with firm-level panel data from 2003 to 2015. The results show that BITs can help host countries attract FDI from emerging market countries. BITs work alongside good institutions to increase the attractiveness of FDI, irrespective of a host country being developed or not.

Permanent establishment as a foreign direct investment in Poland: identification of tax barriers in the context of new tax development

Abstract The paper aims to identify the significant tax barriers to foreign direct investment (FDI) in Poland, in particular in the form of a permanent establishment (PE), in the context of new developments in international tax law. Due to the recommendations of the Base Erosion and Profit Shifting (BEPS) project, launched by Organisation for Economic Co-operation and Development (OECD) to prevent international tax avoidance, the understanding of PE has changed, which could lead to changes in business models. The purpose of the research is also to identify the significant tax barriers to economic activity in Poland, in particular in the form of PE, against the international tax law context. The study conducted by the authors relies on the most current tax rulings and judgments of administrative courts issued between 2017 and 2020. It is concluded that not so much the effective tax burdens but the regulatory ambiguity surrounding the tax obligations may contribute to the reduction of Poland's attractiveness as a location for FDI.

Assessment of the risk of foreign divestment in Poland during the COVID-19 pandemic

The importance of foreign direct investment (FDI) to the economic development of Poland cannot be overestimated, both at the regional level and in relation to the economy as a whole. Since FDIs are powered by capital sensitive to various national and international crises, it seems natural to ask whether the situation connected with the global COVID-19 pandemic is reflected in the reduction of FDI inflows to Poland. The aim of the paper is to identify the determinants of the foreign divestment process in the Polish economy as a whole and in its main sectors during the COVID-19 pandemic. The article analyses scenarios of foreign divestment in Poland in an annual perspective, starting from the outbreak of the epidemic in March 2020 up to February 2021. The study used data from a survey conducted in April and May 2020 among nearly 500 enterprises realising FDI in Poland. The benchmark for the surveyed companies was the level of their involvement in FDIs covering a one-year period prior to the announcement of the epidemic. The application of logit models allowed the identification of the most important factors of foreign divestment during COVID-19, including the location of FDIs in the services sector, industry, the IT sector, increased market openness and interactions of variables taking into account the restrictions introduced to the economy due to the pandemic. The level of risk of divestment of these variables depends, however, on the volume of FDI reductions declared by investors and on the sector of the economy. If considerable divestment is assumed, FDIs in the services sector are then burdened with a higher risk of divestment than FDIs in the processing industry. Assuming small divestments, FDIs in the IT sector constitute a factor bearing the greatest risk of FDI reduction in the entire economy.

Sister cities, cross-national FDI, and the subnational FDI location decision

We investigate how intergovernmental ties at subnational levels between home and host countries influence the intensity and location of foreign direct investment (FDI) inflows. We focus on an intriguing type of subnational tie, namely, International Friendship (Sister) Cities. A sister city is a decentralized form of intergovernmental relationship that provides a platform by which a multinational corporation (MNC) can approach a local government, customers, and clients to acquire localized information and political capabilities. We argue that cities with a sister-city relationship attract more FDIs than other similar cities within a host country. The benefit extends to the national level as MNCs have higher FDI levels in host countries with a greater number of sister cities with their home country. We further investigate whether the effect of sister cities on an MNC’s country selection is greater when host-country subnational governments have a higher degree of autonomy relative to the national government, and lesser when governments have a higher level of policy uncertainty. Using data from the 1990–2009 period, we find consistent support for our ideas as tested at two levels of analysis: a city-level matched sample analysis on Japanese FDI inflows, and a country-level analysis on Japanese MNCs’ country selection.

The role of institutions at the nexus of logistic performance and foreign direct investment in Asia

Foreign Direct Investment (FDI) plays an important part in the economic growth of developing Asia and logistics capability is a crucial factor in FDI location choice. Till today, research investigating Logistics Performance (LP) and FDI in Asia are still lacking and rather inconclusive and not standardised. Using a total of 31 Asian countries covering 2007 through 2017, the study critically investigates the impact of LP on FDI using static panel regression method. The results demonstrate that while LP significantly impact FDI, there is a threshold effect of institutional quality in the LP-FDI relationship. Specifically, this paper found that the impact of LP on FDI varies across the perceived level of institutional quality i.e., the effect is positive only before certain threshold level of institutional quality, after which the effect of LP on FDI is reversed. This finding suggests that the LP-FDI nexus is contingent on the perceived level of institutional quality, thus supporting the idea that innovations (i.e., creativity and flexibility embedded within a sound institutional framework) is potent in delivering long-run LP-FDI development in Asia.

Dialect Diversity and Foreign Direct Investment in China

AbstractThis paper examines the relationship between dialect diversity and foreign direct investment (FDI) using a dataset of 230 Chinese cities for the period 2000–2014. We find that dialect diversity and FDI absorption are negatively correlated. However, this negative relationship disappears gradually over time. Several underlying mechanisms are identified. In particular, it is found that dialect diversity impedes human capital development and hence obstructs FDI absorption. Our results also show that there are threshold and spatial spillover effects. This research increases knowledge of FDI location choice and has implications for foreign investment policymaking.

The Engagement of the Visegrad 4 in International Transfer of Capital in the Form of Foreign Direct Investment in the Post-Crisis Period

The paper concentrates on the international transfer of capital in the form of foreign direct investment (FDI). A relatively high level of investment attractiveness of an economy is required for the attraction of capital in the form of FDI. Inflow of capital in the form of FDI is perceived as a factor stimulating economic development of the so-called catching up economies, and the Visegrad 4 countries can be viewed as such economies. The crucial objective of the paper is to present investment attractiveness of the Visegrad 4 countries in the light of the International Bank for Reconstruction and Development / the World Bank reports and EY’s surveys. A parallel objective is to analyse the engagement of the Visegrad 4 countries in international capital transfer in the form of FDI in post-crisis period in order to identify inward and outward FDI flows and stock. The research tools used in the article included literature studies, descriptive analysis and comparative analysis. The undertaken research leads to a conclusion that foreign capital played an important role in the transformation of the V4 economies and their strong integration with the world economy. It contributed to supplementing capital shortages and increasing efficiency. The V4 countries remain net importers of capital in the form of FDI, though the positions of the V4 as investors in the world market have risen slightly over the last decade. It is of vital importance to introduce dynamic and effective actions aiming at promoting the V4 as a location of FDI and to undertake parallel activities directed at stimulating the V4 investment abroad.

GEOGRAPHICAL CONCENTRATION OF FOREIGN DIRECT INVESTMENT IN ECONOMIC THEORY

The purpose of this article is to review the classical theories on the location of foreign direct investment. Location theory assumes that a firm's production costs and revenues depend on its location. With the first classical business location theories, identifying business location factors has become an important research issue. The most important feature of space influencing location decisions is geographical proximity, contributing to cost reduction and agglomeration benefits.

Foreign Direct Investment in Nepal: A Study on its Impact on Employment

Foreign direct investment (FDI) plays an important role boosting industrial development and promotion of manufactured exports for the developing countries. FDI helps mobilization of capital, human and natural resources of the country, which in turn supports to make the economy dynamic and competitive. FDI is an important source of inflow of capital for economic growth and employment generation in developing countries. It also provides a package which constitutes new technologies and management techniques, financial and market access for the production and movement of goods and services. Though, attracting foreign direct investment has become the major challenges for host countries as it faces the challenges of identifying the major factors that motivate and affect the FDI location decision. That's why Nepal is at a point wherefrom it can excel for economic goals via FDI. Foreign investment is critical to enhance the transfer of capital, modern technology, management and technical skill, increase culture. This article attempts to explore the growth and trends as well as condition of FDI. The results show a significant association between the changes in FDI on Employment. The finding of multiple regression analysis between FDI and employment indicates that FDI is a significant predictor of employment.

Revisiting the location of FDI in China: A panel data approach with heterogeneous shocks

Foreign Direct Investment (FDI) is viewed as a primary driving force in shaping the global economy and receives particular attention in empirical studies. In this paper, we argue that many of the existing studies ignore endogeneities that arise from shocks in source and destination countries. To address this endogeneity issue, we take the “controlling through estimating” idea from the econometric literature and propose using panel data models with heterogeneous shocks to deal with it. We consider the quasi maximum likelihood (QML) method to estimate our proposed model. We investigate the asymptotic properties of the QML estimator, including the consistency, the asymptotic representation, and the limiting distribution. We also propose new statistics to test the validity of the use of traditional dynamic and static panel data estimation methods. Applying it to the location determinants of inward FDI in China, we find that the endogeneity issue does exist, and that controlling for heterogeneous shocks helps to improve the estimation results.

GENDER EQUALITY IMPACT ON FOREIGN DIRECT INVESTMENT GROWTH OF ASEAN COUNTRIES

<p><em>ASEAN become one of the main destination location for Foreign Direct Investment (FDI) however its FDI growth showed a declining trend. On the other hand, gender equality of this region keep progressing over time and surpassed the global average gender equality index. This paper examined the effect of gender equality on the growth of foreign direct investment inflows using static panel model for eight ASEAN countries for 2010-2016 period. Our result showed that gender equality could boost the FDI inflow growth through the increase of labor force participation and tertiary education. Labor force participation able to enhance the effort of boosting FDI growth through the macroeconomic channel such as GDP growth, infrastructure, inflation, interest rate and exchange rate.</em></p>