Patterns Of Foreign Direct Investment Research Articles

Foreign Direct Investment and Economic Development: An International Perspective

Foreign Direct Investment and Economic Development: An International Perspective

The pattern of foreign direct investment in the late 2010s and early 2020s: under international externalities

This article aims to discuss to determine the nature of foreign direct investment (FDI) flows in the late 2010s and early 2020s. International externalities affecting the FDI pattern at the global and regional levels. The research method is mainly qualitative through Document analysis. From theoretical and empirical evidence, this study shows that under the influence of international externalities, investors' motives change leading to a change in their investment strategy and thus a change in the direction of FDI inflows. Research results support the view that COVID-19 is not the only factor that changes the FDI pattern. Several key externalities have been identified such as the Sustainable Development Goals initiated by the United Nations, the New Industrial Revolution, the Policy towards Economic Nationalism, and the Coronavirus Prevention Policy as well as the post-pandemic economic recovery policies. Countries need to have strategies to attract external forces that are both consistent with the current pattern of FDI and coordinated with internal resources to develop the country. This study has contributed to the theory of FDI in modern times. Today, motivations such as exploiting factors of production, seeking strategic assets (tangible assets), and seeking efficiency in distant markets (offshoring) have gradually weakened. They are gradually being superseded by seeking efficiency in the near market (onshoring, nearshoring), and investments in service industries that will complement the autonomous motive.

Foreign direct investment and urban growth in Vietnam: spatial, economic, and demographic perspectives

ABSTRACT This research reviews the volume and the spatial pattern of Foreign Direct Investment (FDI) over three decades in Vietnam. Since Vietnam embraced the market mechanism, Doi Moi, in 1986, foreign investments have become a crucial part of Vietnam, integrating with the world economy beyond former communist countries. Analysing the profiles of 24,624 FDI projects reported in the period 1988–2017, this research has observed the following three interlocked features. (1) Spatial development. Along with growing volume, inward FDI has been highly concentrated in the two top-tier city-regions: the Ho Chi Minh City Region (HCMCR) and the Hanoi Capital Region (HCR). These two city-regions have attracted almost 60% of inward FDI. (2) Economic development. The economic dominance of FDI activities has been observed in these two FDI city-regions. While the HCMCR has attracted a wider range of industries from diverse investors, the HCR has been more specialised in high-tech manufacturing with investments from a smaller mix of origin countries. (3) Globalised demographic development. Inward FDI has been tied up with the influx of foreign nationals. The case of Vietnam illustrates how FDI flows have facilitated territorial changes and urban growth.

Regional Distribution of Foreign Direct Investment in India

The tremendous rise in Foreign Direct Investment (FDI) inflows following the economic reforms in 1991, has been one of the most prominent features shaping the behavior of the Indian economy in the past three decades. The present study is based on secondary data and the objective is to examine the trends in FDI inflows to India following the global financial crisis, for the period 2009-2010 to 2021-2022. Additionally, the distributional pattern of FDI among the regions and states of India is also analyzed, using the data for 30 states/territories. The results reveal that total FDI inflows have increased in substantial amounts over the period from US$ 37,745 million in 2009-2010 to US$ 84,835 million in 2021-2022. Maharashtra and Karnataka have surpassed all other states in FDI equity inflows over the period from October 2019 to September 2022. These two states have commanded 50 percent of the total FDI, whereas the regions in central, eastern, and northeast India have received less than 3 percent of the total FDI equity inflows. Thus, the regional disparities in the distribution of FDI are quite visible post-analysis. It is suggested that government should focus on making investor-friendly policies to tap the potential of regions neglected by foreign investors.

The determinants of inward FDI in India in the 2000s

Purpose Unlike the traditional growth model of emerging markets after economic liberalization, India’s inward foreign direct investment (FDI) surged paralleling its strong economic growth in the 2000s, despite the failure to establish a strong secondary sector. This creates an opportunity to deepen the conceptual and contextual understanding of the pivotal mechanisms that impel foreign multinational enterprises to invest into India and provides a natural setting to better understand the nature of its institutional, political and economic environment. Design/methodology/approach The authors develop a theory contextualized to Indian inward FDI patterns for the 2000–2017 period. The theoretical framework expands upon received investment motives, with explicit consideration given to the idiosyncrasies of developments in India’s recent macro and socioeconomic environment. The authors test the hypotheses using panel data from 134 countries that invested in India, using a Hausman–Taylor estimation. Findings The authors find that India’s transition toward a knowledge economy attracts asset augmenting rather than asset exploiting FDI. Investors appear to target long-term investments by gaining access to India’s digital capabilities, R&D, and growing talent base with a high degree of specialization within analytics, biotechnology, engineering, or pharmaceuticals. Foreign investors do not seem to be notably deterred by infrastructural challenges nor by legal and regulatory restrictions. Originality/value By providing a new perspective on India’s atheoretical economic development and FDI environment, this study offers a distinct point of comparison with regard to established hypotheses within the extant literature on FDI into emerging markets. Rethinking contemporary investment motive theory by introducing an adapted conceptual framework provides further opportunity to inform the understanding of firm strategies in similar environments.

FDI and cities: network dynamics in cleantech innovation

PurposeThe purpose of this paper is to understand the relationship between foreign direct investment (FDI) and cities and how the relationship between multinational enterprise (MNEs) and local firms facilitates regional cleantech innovation.Design/methodology/approachUsing a combination of social network analysis, regression analysis and interview analysis, the authors map and analyze a cleantech cluster to investigate the relationship between MNEs and local firms and the resulting effects on cleantech innovation.FindingsThe findings of the paper indicate that FDI plays a crucial role in cities and their local clusters by acting as a broker between a diverse set of actors: firms, institutions, universities, financial and other intermediaries. Additionally, connectedness to MNEs improves local firms’ innovation.Research limitations/implicationsThis study is not free of limitations, mainly, because of the aspects that the analysis is based on one city and one cleantech hub. Further research could verify whether the findings of this paper hold in other cities and industries.Practical implicationsThe findings, elucidating the connection between MNEs and local firms, as well as MNEs being important brokers in the local system, and the resulting impact, will help policymakers to take appropriate actions and support the local cleantech innovation. It is important to not only attract high-quality FDI into local clusters, but also to create and support collaborations between foreign firms and local actors, because colocation does not automatically leads to positive spillovers and a lot depends on how MNEs are integrated into the local milieu.Social implicationsThe present paper argues that FDI plays an important role in local cleantech innovation and it is important to integrate foreign firms in local social networks.Originality/valueThe authors analyze FDI patterns in an emerging industry at the city and local cluster level using a unique database containing the information on relationships between MNEs and local firms, as well as interview data.

Foreign Direct Investment and the Profit Rate: Empirical Evidence from the European Union

This article aims to explain recent trends of foreign direct investment (FDI) in the developed world, and specifically in the case of the European Union (EU). It includes an empirical analysis of FDI in two distinct EU country groups and finds that the profit rate plays a significant role in determining FDI patterns. It is shown that relatively less developed Eastern EU members have a higher profit rate and thus have established themselves as an attractive FDI destination within the EU. Additional factors that influence FDI are market size, long-term FDI attractiveness, and trade protectionism. Finally, a sectoral analysis of FDI and trade shows that increased FDI in less developed Eastern EU members is mainly of an export-oriented type. JEL Classification: F14, F15, F21, P16

Explaining the global landscape of foreign direct investment: Knowledge capital, gravity, and the role of culture and institutions

AbstractIn this paper, we empirically re‐assess the question which theoretical motives and empirical models are most suitable to explain global patterns of foreign direct investment (FDI). Compared with previous studies, we use bilateral FDI positions with a much more comprehensive coverage of emerging and developing economies, the IMF's Coordinated Direct Investment Statistics. We apply cross‐validation to assess the performance of the gravity model and the knowledge capital (KK) model and add cultural, institutional and financial factors, as suggested by different theories on FDI determinants. We find the gravity model to achieve the best theory‐consistent out‐of‐sample prediction, particularly when parameter heterogeneity of South and North FDI is allowed for. Controlling for surrounding market potential is important to recover the horizontal effect of the gravity model. Our finding that the gravity model for FDI performs well but requires some degree of parameter heterogeneity and the inclusion of surrounding market potential provides a clear baseline for future empirical studies of FDI determinants. Inclusion of institutional, cultural or financial factors seems less relevant and does not improve the model performance distinctly, although results for those variables are mostly in line with theoretical predictions.

Insecurity and Patterns of Foreign Direct Investment in Nigeria (1999-2014)

This study examined the nature and trend of insecurity and patterns of Foreign Direct Investment (FDI) in Nigeria from 1999-2014 with a view to provide information on how insecurity affects the patterns of FDI in Nigeria. The study employed both primary and secondary data. Primary data were sourced through in-depth interviews conducted on purposively selected respondents from Ministry, Departments and Agencies (MDAs) of government who are directly involved in handling issues of security and FDI in the country; economic attaché of some selected embassies; foreign business organisations in the country and the academia with interest on FDI and security issues. Secondary data were sourced from academic journals, government publications, newspapers and magazines on variables such as FDI and insecurity. The study adopted the theoretical framework of liberal transnationalism of political economy perspective. Data were analysed using qualitative and descriptive methods. The result revealed that the nature and trend of insecurity negatively impacted on the patterns of FDI in Nigeria both in the oil and non-oil sector within the period under studied.

UNCTAD insights: Forecasting global FDI: A panel data approach

The future patterns of foreign direct investment (FDI) are important inputs for policymakers, even more so during severe economic downturns, such as the one caused by the COVID-19 pandemic. Yet, there is neither empirical consensus nor significant ongoing empirical research on the most appropriate tool for forecasting FDI inflows. This paper aims to fill this gap by proposing an approach to forecasting global FDI inflows based on panel econometric techniques – namely the generalized method of moments – accounting for the heterogeneous nature of FDI across countries and for FDI dependence across time. The empirical comparison with alternative time-series methods confirms the greater predictive power of the proposed approach.

Trends and Patterns of Foreign Direct Investment in India: An Empirical Analysis

India embarked on a journey of economic reform in 1991 in order to remove the structural and institutional bottlenecks that were plaguing the Indian economy. The objectives of reforms were to achieve higher growth and efficient utilization of resources and thereby redistribution of resources. The reforms introduced in 1991 could be characterized as liberalization, privatization and globalization. Attracting FDI as an addition to existing pool of resources was one of the major objectives of reform. Since 1991, inflow of FDI in India has been rising steadily. The process that begun in 1991, has been constantly reformed in order to achieve the aspiration goals of India. The recent regime in India has reinvigorated economic reforms and thus helped in attracting historic level of FDI inflow. There seems to be a point of break around 2014 which marks that FDI inflow has peaked considerably thereafter.

The Indian Economic Factors Impact on Foreign Direct Investment (FDI) On Indian Economic Growth.

The study covers several aspects of FDI in the country, ranging from FDI patterns and FDI drivers to FDI relations, growth and exports, taking into account several factors such as the formation of raw equities, macroeconomic stability, institutional capital and human capital. In recent years, the FDI has increased so greatly that it has surpassed all other metrics of economic transactions. Countries are bidding for the highest levels of FDI, as they are the cheapest foreign funding. The FDI rate has increased to the developed countries in the last two decades, compared to the previous trend. There may have been a surprising rise of Asia as big FDI recipients. In the 2014 industry review, the highest FDI for the service sector was found. In the fields of training, accounting, infrastructure and telecoms, most of the FDI inflows are generated. The self-employed industries authorize government investments in chemical, metallurgical, automobile, Pharmaceutical and tourism sectors. The main recipient is FDI, but FDI flows are subject to policy constraints. Despite the lack of restrictions on FDI inflows in metallurgical, chemical, automotive, pharmaceutical and tourism industries, FDI growth in those sectors was much lower than in the FDI markets for utilities and telecoms.The study focuses on the impact of Indian Economic Factors on Indian foreign direct investment.

The Sectoral Investments Impact On Foreign Direct Investment In India

The study covers several aspects of FDI in the country, ranging from FDI patterns and FDI drivers to FDI relations, growth and exports, taking into account several factors such as the formation of raw equities, macroeconomic stability, institutional capital and human capital. In recent years, the FDI has increased so greatly that it has surpassed all other metrics of economic transactions. Countries are bidding for the highest levels of FDI, as they are the cheapest foreign funding. The FDI rate has increased to the developed countries in the last two decades, compared to the previous trend. There may have been a surprising rise of Asia as big FDI recipients. In the 2014 industry review, the highest FDI for the service sector was found. In the fields of training, accounting, infrastructure and telecoms, most of the FDI inflows are generated. The self-employed industries authorize government investments in chemical, metallurgical, automobile, Pharmaceutical and tourism sectors. The main recipient is FDI, but FDI flows are subject to policy constraints. Despite the lack of restrictions on FDI inflows in metallurgical, chemical, automotive, pharmaceutical and tourism industries, FDI growth in those sectors was much lower than in the FDI markets for utilities and telecoms.The study focuses on Foreign Direct investment (FDI) flows impact on select sectoral growth in India.

China's outward foreign direct investment in the Belt and Road Initiative: What are the motives for Chinese firms to invest?

Because of the potentially large and important effects of the extremely ambitious Belt and Road Initiative (BRI) launched by China in late 2013, considerable attention has been given to the motives for, and repercussions of, the BRI-driven infrastructural projects. Yet, the non-infrastructural outward foreign direct investment (FDI) from China to BRI countries, which varies quite substantially across different sectors and different countries, has not yet received much attention. In contrast to some recent studies showing that the massive initiative has increased China's total FDI outflows to fellow BRI countries, in this paper, based on our sector-level difference-in-differences models, we find that effect to be statistically insignificant. Yet, at the same time, we provide empirical evidence on the sectoral pattern of China's outward FDI before and after 2014 indicating that China's FDI outflows to BRI countries have significantly increased in sectors characterized by overcapacity and contributing to pollution in China, thereby demonstrating that China's BRI-driven outward FDI has been very selective in terms of sectors. We confirm these findings with a variety of robustness checks and show that it is BRI countries with relatively low institutional quality that have been more likely to receive these types of FDI from China. We thus speculate that Chinese firms have been motivated to place FDI investments in BRI countries for the sake of alleviating China's own overcapacity and pollution problems. Our findings lead us to suggest that, although these sectoral patterns are consistent with the different stages of economic development in which China and its fellow BRI-identified countries find themselves, Chinese investors and host country governments should be more concerned with the potential for unwanted side-effects of the FDI investments so that the mutually beneficial effects of the BRI can be sustained into the indefinite future among all countries involved.

Nexus of ecological footprint and foreign direct investment pattern in carbon neutrality: new insight for United Arab Emirates (UAE).

Carbon neutral is among the possible ways of solving the problem of climate change. Many scholars have utilized different single indicators such as CO2 and methane with different variables to mitigate the possible ways of solving the problem of global warming. The present study employs a specific country (UAE) approach to investigate the possible way of solving climate change. The author utilized 1980-2018 annual data of the UAE to investigate the possibility of carbon neutral in the UAE as to suggest ways of limiting climate change. Both linear and non-linear (squared) foreign direct investment (FDI) and GDP per capita were added to the study and considered as the variables of interest and other control variables (energy use and population). Among the findings of this study are inverted U-shaped relationship between economic growth (GDP per capita) and ecological footprint which confirms EKC for the UAE, positive relationship between energy use and ecological footprint, negative relationship between FDI and ecological footprint in all stages which established a flat pattern of relationship, and a positive relationship between the population and ecological footprint. Findings from causal analyses exposed a two-way direction or feedback (bidirectional) between economic growth (GDP) and urban population, and between energy use and urban population both in the short and long run. Also, a one-way transmission (unidirectional) is found transmitting from ecological footprint and FDI to population both in the short run and long run; from the ecological footprint, energy use, and FDI to economic growth; from the ecological footprint and FDI to energy use in the long run; and from ecological footprint to FDI and energy use in the short run. The policy focus should be towards the improvement on the urban population. FDI pattern suggests the pollution halo hypothesis which is a pointer towards its (FDI) crucial contribution to environmental performance. Hence, FDI should be encouraged through relaxing of some laws that are preventive in nature towards FDI so as to maintain this positive trend towards sustainable development. The analytical abstract demonstrates the interactions that exist among the employed variables in Granger causality analysis. The big arrows denote two-way transmission while the small arrows show one-way causal transmissions passing to the variables where they are pointing at.

Incentivizing embedded investment: Evidence from patterns of foreign direct investment in Latin America

Governments frequently offer tax incentives to induce localized investments. This is puzzling because previous research finds tax incentives are rarely decisive factors in firms’ locational decision-making. Some argue incentives reflect hyper capital mobility, which strengthens multinational enterprises’ bargaining leverage vis-a-vis governments that wish to attract investment. Others emphasize the domestic political institutions and electoral considerations that incentivize politicians to publicly court investors. We argue that firms’ leverage over governments stems from investment characteristics associated with governments’ broader development objectives. We test our argument on deal-level data on investment incentives in Latin America from 2010 to 2017. Our results indicate firms are more likely to receive incentives when they are already embedded in local markets and when they exhibit characteristics associated with low ex post mobility. These results challenge widely held beliefs over what provides firms political power in an age of globalization, and suggest that governments use incentives primarily to fulfill their economic and political objectives rather than because globalization destroys states’ capacity to tax mobile capital.

The Relationship between Economic Complexity and the Pattern of Foreign Direct Investment Flows among Mexican States

Identifying factors that explain the regional distribution patterns of Foreign Direct Investment (FDI) flows into an economy is no simple task, since they depend on a range of factors. In the case of Mexico, previous studies have documented the role of diverse characteristics in attracting FDI to the country’s states. This study shows that economic complexity - a variable that indicates the productive capabilities or productive knowledge that exist in a given economy’s economic structure - can explain the distribution of FDI among Mexican states. Similar to previous studies, we document the spillover effects of economic complexity, i.e., we show how states surrounded by states with a high level of economic complexity tend to receive more FDI. Moreover, we document how FDI flows to manufacturing industries are positively correlated with their level of economic complexity. This result, to the best of our knowledge, has not been documented before in this literature.

Trends and Patterns of Foreign Direct Investment in India: An Empirical Analysis

Trends and Patterns of Foreign Direct Investment in India: An Empirical Analysis

Analysing Long-Term Socio-Economic Impacts of COVID-19 across Diverse African Contexts

The spread of COVID-19 has been devastating for the millions of people who have been infected by the virus and lost their lives and the tens of millions of people who have lost their work and livelihoods. Governments and civil society have responded swiftly to the virus with policies that reduce human interaction and slow its spread. These policies have had the adverse effect of further reducing labour participation, productivity and capital utilization, reducing household consumption and increasing poverty across various thresholds, both in absolute and relative terms (Dabalen and Paci, 2020; International Monetary Fund [IMF], 2020b; Organisation for Economic Co-operation and Development [OECD], 2020a; Roberton et al., 2020; Verity et al., 2020; World Trade Organization [WTO], 2020). The COVID-19 pandemic has significantly reduced economic growth and altered patterns of international economic interaction. While we are still in the midst of the crisis, there is real concern that the majority of macroeconomic effects will not be temporary, but will disproportionately shift long-term development pathways in low- and middle-income countries, offsetting some of the gains made towards achieving the Sustainable Development Goals (SDGs) in recent decades. In this report, we study the long-term dynamics of COVID-19 at the country level in Africa through a macroeconomic lens. Specifically, we analyse how today’s effects on country-level mortality, gross domestic product (GDP) growth and international monetary flows of trade, aid, foreign direct investment (FDI) and remittances will shape long-term patterns of mortality, economic growth and international trade by 2030 and 2050. In addition, we unravel how these macroeconomic changes will affect socio-economic indicators and human development by quantifying the outcomes for child mortality and poverty over the coming decades. This report presents a conceptual framework (see Figure 1) that conceptualizes the effects of COVID-19 on human development as cascading across three systems. First, COVID-19 directly effects human health systems, changing patterns of mortality and morbidity with differential distribution across countries. Second, these direct health effects are mitigated through government policy and civil society actions that reduce human interaction, slowing the spread of the virus and saving lives while also reducing economic activity and changing patterns of production and consumption. Finally, these changing economic effects ripple through the international economic system, changing patterns of trade, FDI, foreign aid and remittances. Some countries may have fewer direct health effects from COVID-19 – a finding particularly relevant for many countries in Africa – but may experience more direct effects from changing patterns of international economic interdependence.We model these dynamics across 10 countries in sub-Saharan Africa: Angola, Cabo Verde, Chad, Democratic Republic of the Congo, Ethiopia, Kenya, Mali, Mauritius, Nigeria and South Africa (referred to as the Africa-10). The countries were selected based on regional spread, differences in their domestic economic structure, and their dependency and interconnectedness with the global economic system. We use the International Futures (IFs) model to assess the immediate and long-term consequences of COVID-19 across these first-, second- and third-order effects. We built scenarios with diverging assumptions around the COVID-19 effect on mortality in 2020 and GDP growth and international trade in 2020 and 2021. We compare these scenarios with a No-COVID scenario, representing a world in which COVID-19 did not occur.

Determinante SDI u Evropi i uticaj Kine

Despite recent concerns about the increasing influence of outside investors on the European Union (EU) and Western Balkans, the developed European countries are still a dominant source of foreign direct investment (FDI) in the region, confirming the benefits of EU membership. At the same time, fast-growing connectivity and lower trade costs in accession and neighboring countries determine the FDI growth from China, particularly via the Belt and Road Initiative (BRI). By applying panel data over 2000-2019 for 34 countries, which form 89% of all European FDI, we first examine FDI patterns around Europe, compare the EU, NMS, and Western Balkans; verify the importance of EU membership for FDI, caused reducing trade costs and improving connectivity. Thus, the new EU member states (NMS) and Western Balkans appear both as a home country and as a pre- entry destination to the EU. Then, we calculate trade costs indices for each selected country and partners over time and find that Europe and China are closely interconnected through trade and FDI. It means that stronger ties with China can be realized for the sample countries at the cost of easing relations with the EU. Finally, incorporating trade costs indices into the FDI model; we evaluate the impact of connectivity on FDI and estimate how BRI affected FDI in Europe. Additionally, we validate that the old framework of horizontal and vertical FDI not representative well and even new complex vertical or export-oriented FDI strategies are shifting today.