Presence Of Foreign Direct Investment Research Articles

The Position of Foreign Investment in the Indonesian Economic System Based on Pancasila and the 1945 Constitution of the Republic of Indonesia

Objective: This research aims to find arguments (theories) to ensure that foreign direct investment does not conflict with but is in accordance with the values of Pancasila and the provisions of the 1945 Constitution of the Republic of Indonesia. Conceptual foundation: Each country in the world cannot isolate itself but must establish relationships and work together to achieve the good of those countries. Robert Jackson and Georg Sorensen said that each other's countries are independent and have sovereignty. But they are not estranged from each other. They are adjacent to and influence each other and side by side and opposite each other. Therefore, complete separation of one country from another is not an option. A country that is isolated and disconnected from other countries will usually suffer. Method: This research is normative juridical using conceptual, statutory, and historical approaches. The legal materials used are primary legal materials and secondary legal materials, which are collected systematically according to the issues of concern in this research and the collection technique uses literature study, then the problems are analyzed qualitatively. Result and conclusion: Foreign direct investment has a position as part and complement of the Indonesian economic system because its existence is in accordance with the values contained in Pancasila and the 1945 Constitution of the Republic of Indonesia. Contribution: The results of this research convince and invite the Indonesian people that the presence of foreign direct investment in the Indonesian economic system no longer needs to be debated, but accept foreign direct investment as a complement and encourage growth and realize the welfare of the Indonesian people in accordance with the Preamble to the Constitution of the Republic of Indonesia.

Global eco‐innovation and its local impact in emerging economies: Boundary conditions of environmental regulations and pollution intensity

AbstractThis paper examines the eco‐innovation effects of foreign direct investment (FDI) by its economic agents, multinational enterprises (MNEs), in the context of emerging economies. It particularly focuses on environmental regulations and industrial pollution intensity as the key moderating mechanisms. We develop hypotheses by combining economic rationality of natural‐resource‐based view and institutional rationality of institution‐based view. Our theoretical discussions highlight the importance of the intersection between the two theories in explaining the eco‐innovation effects of foreign ownership and FDI spillovers, and in particular in allowing a nuanced consideration around the under‐explored boundary conditions of FDI effects in the eco‐innovation domain. Using the propensity score matching method to match domestically owned enterprises (DOEs) with foreign MNE‐invested enterprises (FIEs) in China during the period of 2001–2013, we find clear evidence that FIEs outperform their domestic counterparts of similar characteristics in conducting eco‐innovation. This superior performance is particularly pronounced in cities with higher levels of environmental regulation and industries with higher levels of pollution. Furthermore, we assess the local impact of MNEs on eco‐innovation of DOEs and find evidence that the presence of FDI, in particular, that within cities, leads to increased eco‐innovation in DOEs. FIEs' eco‐innovation spillover effects within a city are conditional on environmental regulation and pollution intensity. Thus, in China, MNEs are found to act as agents of change who not only conduct eco‐innovation in the host country but also stimulate the eco‐innovation of DOEs.

The impact of foreign direct investment on innovation at domestic firms: Evidence from the deregulation of foreign investment in China

AbstractThis paper studies the impact of foreign direct investment (FDI) on innovation by domestic firms in China. A difference‐in‐difference estimation strategy yields causal evidence by exploiting China's deregulation of FDI in 2002. Analysis of a matched firm–patent data set from 1998 to 2007 shows that both the quantity and quality of innovation by domestic firms benefited from the presence of FDI. Emphasizing the importance of knowledge spillover from FDI in similar technology domains, the authors examine the role of horizontal FDI and FDI in technologically close industries—those sharing similar technology domains. Findings show that the latter generates much more substantial positive spillover than the former. The paper also shows that knowledge spillover from FDI in similar technology domains is not driven by input–output linkages. In addition, the spillover effect is stronger in cities with higher human capital stock and firms with higher absorptive capacity.

Risk Analysis of Optimization of FDI in Indonesia Evidence of Cointegration Modeling and ECM

Foreign Direct Investment (FDI) is one of the superior strategies commonly used by governments from developing countries to obtain funding for development. Because of the research that concentrates on risk management, the authors tried to use six free variables derived from the economic framework. The goal is to be able to find out how the selected free variables affect long - term and short - term FDI optimization. Then from the six variables, the author identified unexpected incident which can cause the risk of FDI optimization in Indonesia. Error correction model is the method used by the author to process the data. The results showed similar results for both the long and short term. Exports and foreign debt are variables that do not significantly affect the presence of FDI in Indonesia. Meanwhile, interest rates and exchange rates are free variables that have a positive and significant effect, while labor and GDP have a negative and significant effect.

Gender segregation in the causal effect of foreign direct investment on educational attainment: the Chinese experience

ABSTRACT We examine the causal effect of foreign direct investment (FDI) on educational attainment through the lens of gender segregation in China. Using a comprehensive dataset for the 1985–2014 period and controlling for endogeneity, we find that a more prominent FDI presence causes higher educational attainment, particularly for women. Moreover, we show that this gender-segregated causal effect remains robust to different estimators, measurements and specifications. Overall, we uncover an important social externality of FDI that has never been explored systematically in the literature; namely, FDI generates positive spillovers on female educational attainment in its host country.

A validity of environmental Kuznets curve under the role of urbanization, financial development index and foreign direct investment in Pakistan

PurposeThis research aims to inspect the existence of the “environmental Kuznets curve” (EKC) in the presence of foreign direct investment (FDI), financial development (FD) and urbanization throughout 1972–2018 for Pakistan.Design/methodology/approachFor time series analysis, Phillips and Perron (PP) and Augmented Dickey–Fuller (ADF) unit root tests are used to confirm the level of integration. For robustness, Kim and Perron (2009)’s structural break unit root test is employed, which identifies the order of integration in the presence of structural break years. Further, combined cointegration analysis is performed to confirm the existence of a long-run association between underlying variables. Furthermore, autoregressive distributed lag (ARDL) analysis is employed for the robustness of the cointegration approach.FindingsThe cointegration analysis confirms the existence of a long-run association among variables. The authors find a positive and significant impact of urbanization, FD and foreign development on environmental degradation in the long run. Similarly, only FDI increases environmental degradation in the short run. In addition, the authors find an inverted U-shape relationship between economic growth and environmental quality which, further, confirms the presence of EKC in Pakistan.Originality/valueThis research contributes to applied economics in many ways: the combined effect of urbanization, FD, FDI and economic growth on carbon dioxide (CO2) emission is checked simultaneously. To avoid ambiguity, this study constructs the FD index through the principal component analysis (PCA). Moreover, the role of structural breaks has been considered through the analysis. Novel Bayer-Hanck combined cointegration analysis is employed to detect the existence of long-run relationships among underlying variables.

ICT Diffusion, Foreign Direct Investment and Inclusive Growth in Sub-Saharan Africa

This study examines the joint effects of ICT diffusion (composed of access, usage and skills), and foreign direct investment (FDI) on inclusive growth in sub-Saharan Africa (SSA). The study draws on data from the World Bank’s World Development Indicators, and the Global Consumption and Income Project for the period 1980–2019 for the analysis. The study provides evidence robust to several specifications from the ordinary least squares and dynamic system GMM estimation techniques to show that: (1) unconditionally, both FDI and ICT diffusion induce inclusive growth in SSA; (2) compared to its direct effect, ICT diffusion is remarkable in fostering shared growth in SSA in the presence of FDI, and (3) relative to ICT access and ICT usage, ICT skills is more effective for enhancing inclusive growth in SSA. Overall, FDI modulates our ICT dynamics to engender positive synergy effects on inclusive growth. Policy recommendations are provided in line with the implementation of the African Continental Free Trade Area (AfCFTA) Agreement and the projected rise in FDI to SSA from 2022.

Nexus of Renewable Energy Consumption, Economic Growth, Population Growth, FDI, and Environmental Degradation in South Asian Countries: New Evidence from Driscoll-Kraay Standard Error Approach

Environmental degradation is the most prominent area nowadays, especially in developing counties where high renewable energy consumption and population growth deteriorate the atmosphere of the country. Thus, the current study investigates the nexus among renewable energy consumption, economic growth (EG), population growth, foreign direct investment (FDI), and environmental degradation in South Asian countries. The covariance matrix estimators that are developed by “Driscoll and Kraay” are used in this study. The primary property of this estimator is that it does not account for the cross-sectional dependence; thus, it provides substantial, robust outcomes among the cross-sectional units while in the presence of cross-sectional dependence. The data was collected from the World Development Indicators (WDI) from 2001 to 2019. The findings exposed that positive nexus among the population growth, FDI, and environmental degradation while renewable energy consumption and EG has negative nexus with environmental degradation and also not supported the EKC hypothesis in South Asian countries. These findings suggested that the regulators should develop policies that reduce environmental degradation in the presence of high EG, energy consumption, FDI, and population growth.

Labour Productivity Spillovers from Foreign Direct Investment: Evidence from Malaysian Industry Level Panel Data by Labour Skills Composition

This study adds to the literature by examining both technology and knowledge spillover effects of foreign direct investment (FDI) according to skill composition and also by country spillovers in Malaysian medium-high industry, which raises the question of the real benefits produced by both spillovers that Malaysia can reap from the presence of FDI in enhancing the labour productivity. Using the seemingly unrelated regression (SUR) estimator to estimate labour productivity function by skill composition, the results reported that the presence of Japanese, Singaporean and the United States MNCs are statistically significant in influencing the productivity of high and medium-skilled workers from both technology and knowledge spillover effects during the period of 2000 to 2018. Conversely, the analysis indicated that both Chinese and Taiwanese MNCs significantly increase the low-skilled labour productivity. An interesting finding was discovered, that the negative association between knowledge spillovers and labour productivity across the skills draws the attention for the role of local firms as recipients of FDIs depends not only on their absorptive capacity but also on their strategic decisions regarding search direction and motivational disposition to absorb external knowledge. These issues need to be investigated further to understand how local firms may increase their chances of benefitting from MNC presence.

Tracing Value Added in the Presence of Foreign Direct Investment

We develop a unified framework to trace value added along global supply chains in the presence of foreign direct investment by decomposing either GDP based on forward linkages or final production based on backward linkages. The new framework accounts for the presence of foreign invested enterprises (FIEs), their interactions with local firms in the host countries as well as their activities in international trade. The size of the GVC activities identified with this framework roughly doubles that in the previous literature that treats FIEs the same as local firms. The “missing GVC activities” are more serious for high-tech sectors than for those with a lower R&D intensity, and more serious for high-income economies than for middle-income economies.

The Impact of Foreign Direct Investment by Economic Activity on Gross Domestic Product Growth in Kosovo

The effects of the foreign direct investment (FDI) on economic growth, both in developed and non-developed countries, have been investigated for decades. In Kosovo's new economy, the FDI's presence is essential for economic and social development. This study aims to examine the impact of FDI by economic activities, known as "high-level aggregation," on the gross domestic product (GDP) growth for the period 2010-2019. The multiple regression is used to analyze the strength and direction of the FDI's impact on the GDP. The results show that FDI in the activities belonging to the primary sector has negatively impacted the GDP. In contrast, the FDI in activities of the secondary sector indicates a positive impact. Concerning the tertiary sector, the result differs among the types of activities. The FDI in real estate, renting, and business activities have a positive impact on GDP. Also, the FDI in public administration, education, human health, and social work activities has a substantial impact on GDP growth. The other FDIs belonging to the tertiary sector showed adverse impacts. So, the findings suggest that in a new economy, the FDI in activities that are more apt to induce positive externalities has more potential to increase the GDP in the long run. Otherwise, the impact may be low or adverse.

FDI, exports and export spillover in Taiwan’s electronics industry

This study primarily examines whether and how a firm’s exports are influenced by its own and other firms’ foreign direct investment (FDI) in an industry characterized by high proportions of exporters and FDI. A review of 619 firms in Taiwan’s electronics industry from 2006 to 2011 indicates the presence of optimal FDI in terms of exports. In addition, results suggest a negative (positive) export spillover from FDI for firms with low (high) FDI, signifying that FDI’s congestion/crowding-out effect is greater (less) than the demonstration/imitation effect for such firms. Moreover, a firm’s exports generally decrease with other firms’ exports particularly when its FDI is low, thus suggesting the predominance of competition’s negative effect over its positive effect under such circumstances. Furthermore, export spillover from FDI occurs through the competition effect and technology information effect, where the former (latter) drives a negative (positive) export spillover.

EXAMINING THE RELATIONSHIP BETWEEN FOREIGN PURCHASE LIBERALISATION AND HOUSING AFFORDABILITY

This study attempts to examine the relationship between liberalisation of foreign purchase of properties and housing affordability in the presence of foreign direct investment (FDI) inflows. The negative relationship between liberalisation and affordability has caused dissatisfaction among Malaysians as house price has increased drastically since the government liberalise the foreign purchase of property. While Malaysia continues to receive FDI inflows which have been the engine for the country’s economic growth, it would be appropriate to examine the relationships between the liberalisation of purchase for properties by foreigners and the housing affordability within this context. Utilising the Johansen Cointegration method, this research analysed the long-term relationship of liberalisation of foreign purchase within the property sector and affordability of terrace houses. Through the use of the Channel method, this research also examines the role of FDI in the relationship.

Dampak Spillover Penanaman Modal Asing terhadap Produktivitas Industri Manufaktur Medium-High Technology di Indonesia

This study examines the impact of foreign presence in the Medium-High and High technology manufacturing industry in Indonesia. Using a balanced panel data that consists of 2,397 firms and in the year of 2010-2014, the data was estimated using the multiple regression method. The results show that there is positive spillover when local and foreign firms are in the same industry. Conversely, in different industries, negative spillover occurs in forward linkage when local firms buy the output of foreign firms and no spillover occurs in backward linkage when local firms become the suppliers of foreign firms. The Indonesian government must assure that foreign investment policies must benefit the domestic companies, considering there are some potential losses for domestic enterprises by the presence of foreign direct investment in the domestic market.

Influence of foreign direct investment on domestic investment in the Russian economy

The paper is devoted to the empirical estimation of the effects of foreign direct investment (FDI) on domestic investment in the Russian economy. The results suggest that there are crowding-out effects of FDI on the Russian economy. Using the firm-level database for 2008—2017, we analyze the presence of foreign companies in the Russian economy on the region, industry and industry in region levels. On the regional level the statistically significant effects of crowding out domestic investment are identified for state-owned, large as well as less effective companies. On the industry level the negative effects of crowding out are observed in case when FDI share in the industry exceeds 25. Estimating the effect of FDI presence on the industry in the region level, we reveal crowding out effects mainly for private and more effective national companies. Analyzing the effects in case of different levels of FDI in the economy, we do not find support for the hypothesis of adaptation of national companies for foreign companies’ presence in the economy. The paper suggests that the government policy in FDI regulation should focus on mitigation of the effects of pushing national companies off the market, and also creating conditions for cooperation of foreign and domestic companies.

Executing absorptive capacity: a case study of spillover utilization by a domestic firm in China’s hotel industry

Foreign direct investment (FDI) spillovers are critical for domestic firms’ growth. Extant econometric research focuses on spillover sources and explores whether FDI presence can increase the domestic firm’s productivity. In contrast, adopting a spillover-absorber perspective, we conduct a qualitative study of a Chinese hotel’s absorption of spillovers over a 16-year period. Our findings delineate how a domestic firm executes constituent activities of absorptive capacity (AC) to utilize spillovers, and how organizational antecedents (organizational commitments and organizational culture) at the strategic level, and complementary capabilities (socialization capabilities and systems capabilities) at the operational level, enhance its potential and realized AC, respectively.

Investment optimization for APEC member countries (economic studies & challenge of DPMPTSP-DKI Jakarta)

Foreign Direct Investment (FDI) is one of the economic indicators that is currently getting special attention from the government. This is because the presence of Foreign Direct Investment has a direct and indirect influence on economic performance in a country. The purpose of this analysis is to find out how big the role of indicators of ease of doing business, especially the starting a business and dealing with construction permits, which was initiated by the World Bank in influencing Foreign Direct Investment on APEC member countries. The method of this study is a causal relationship with multiple linear regression analysis using the Generalized Method of Moments to estimate the parameter. The results obtained from this analysis are that the starting a business has a considerable role in foreign direct investment in addition to the economic control variables in the form of Real GDP, Labor Force, and Human Development Index. The conclusion of this study is starting a business and the Human Development Index has a very vital role in the development of investment for the Asia Pacific region.

Do foreign investment and trade spur innovation?

Using large firm-level and industry-level data sets from eighteen countries, we find that foreign direct investment (FDI) and trade have positive spillover effects on product and technology innovation by domestic firms in emerging markets. The FDI effect is more pronounced for firms from advanced economies. However, while we detect the spillover effects with micro data at the firm-level, when we use linkage variables computed from input-output tables at the industry level we find much weaker, and usually insignificant, effects. These patterns are important for policy, suggesting that spillovers are localized to firms engaged directly with multinationals and in trade, rather than affecting all domestic firms in industries with FDI presence.

Spatial dependence, foreign investment and productivity spillovers in new EU member states

ABSTRACT This paper presents new empirical evidence on the impact of foreign direct investment (FDI) technology spillovers on the productivity of domestic firms in manufacturing and services in Central and East European regions over the period 2007–11. The complex impact of FDI is separated into direct and indirect effects while accounting for spatial feedback effects. Findings suggest that FDI presence generates negative intra- and interregional market-stealing effects on direct rivals and positive spillovers on downstream firms. The effects are larger from FDI in neighbouring regions and increase with distance.

Does FDI Presence Make Domestic Firms Greener in an Emerging Economy? The Effect of Media Attention

In this paper, we theorize that foreign direct investment (FDI) presence into a host country of emerging economy enhances the host country’s media attention on the environment protection. Such enha...