Regional FDI Research Articles

Geographical FDI knowledge spillover and innovation of indigenous firms in China

In recent decades, theoretical debate on firm innovation has considered particular forms of spatial clustering and foreign direct investment as almost mutually exclusive drivers. While cluster literature pays less attention to firm heterogeneity in ownership structure, FDI literature ignores the importance of geographical dimension in spillover effects. This study combines these two lines of theoretical inquiry to investigate regional FDI knowledge spillover effects on product innovation of China's indigenous electronic firms. It is found that localized innovative-related activities of foreign-invested firms significantly facilitate product innovation of domestic firms. However, FDI horizontal spillover is more important than vertical spillover and cross-sector rather than intra-sector knowledge is significant for indigenous innovation. FDI spillover effects can be reinforced by local innovative activities of domestic firms. This study highlights the significance of geographical proximity and relatively heterogeneous knowledge in FDI spillover effects on domestic innovation but questions the mutual trust relationship between foreign and domestic firms in a cluster.

The Spatial Dimension of FDI in the MENA Countries

In this study, we analyze the attractiveness of MENA countries to promote FDI inflows. The gravity empirical specification is used to examine the bilateral FDI inflows from sixteen developed countries to eight MENA countries over the period 1985–2010. We estimate FDI determinants using spatial model to evaluate the proximity effect between the parent and host countries. The results show that there is high significant spatial dependence between economies. The third-country effect implies that there are positive regional FDI inflows on the host countries but not at FDI agglomerations level. The integration of the market potential variable in the model shows that FDIs in this region serve the OECD market more than the MENA market. For other determinants, the estimation implies the necessity for the MENA countries to improve their institutional and human infrastructure and to enhance their economic integration in both regional and international levels. JEL Classification: C21, F24

Regional Political Energy, FDI and Regional Economic Efficiency: Evidence from Chinese Prefecture-Level City

By setting Chinese regional political energy index (PEI) and using DEA-Malmquist to compute regional economic efficiency, we find that PEI has a significantly positive impact on FDI, as well as the more FDI flows into, the higher economic efficiency is.

The Influence of FDI on Energy Efficiency of China: An Empirical Analysis Based on DEA Method

Based the panel data of China from 1997 to 2008, this paper computes the regional total-factor energy efficiency (TFEE) in China by using the method of the data envelopment analysis (DEA) and then discusses the influence of regional FDI on local energy efficiency. The empirical results show that, FDI improved China's average level of energy utilization efficiency by technical and structural effect channels; the FDI in the eastern region and the central region improved local energy efficiency, however, western area FDI reduced the energy efficiency.

FDI and Regional Disparities Growth in Romania

Because of the multiple benefits they have on the receiving economy, FDI causes a true global competition. In the current economic climate, the foreign direct investments are a good alternative source for financing the Romanian economy. This paper analyse the FDI stock, inequality and growth in Romanian economy by regions. By analysing the evolution of FDI stock and GDP per capita in Romania during 2003-2011, the present paper try to highlight some aspects related to the regional development and FDI relation from the viewpoint of the sustainable development in Romania's economy. The paper provides a new perspective on the issue of why FDI are attracted or not by Romanian regions. The study is based on the hypothesis that FDI inflows can influence the regional development and economic-social welfare in Romania. In this perspective, the final objective of the paper is the answer to the following question: “are FDI a factor of regional disparities growth or one of diminution?”.

Foreign Direct Investment in the New European Union Member States and Developing Countries of Asia under Conditions of the Global Financial and Economic Crisis: Comparative Aspects

The objective of this article is a comparative analysis of the changing position of new European Union member states and the developing countries of Asia in global and regional FDI flows as well as an assessment of the impact of the global crisis on the position of these regions and selected countries in terms of FDI. The analysis encompasses European Union member states that received membership as a part of the enlargement of 2004 and 2007 as well as the developing sub–regions of Asia—i.e. East, South-East, and South Asia. The conducted analysis demonstrates that the position of the developing countries of Asia is significantly stronger than that of the new European Union member states, which is mainly determined by the scale of the economies of countries such as China and India. Subject to conditions of global crisis, Asia and Oceania as a whole noted growth in the inflow of FDI in 2008 by almost 17%, where the European Union member states saw a 2% fall. The situation inside the analyzed regions is extremely varied in terms of noticeable effects of the crisis in the FDI sphere. It is dependent on not only processes of economic growth, but also on the character of investments made in the individual countries and sub– regions as well as motives behind the actions of investors.

Does China receive more regional FDI than gravity would suggest?

Summary It is an empirical regularity that the activities of multinational corporations are concentrated in their home region. This has been shown to be the case for a majority of the 500 largest multinationals as well as for subsets of this 500 sorted by region or industry. The analysis has also been applied to the activities of a sample of all US and OECD multinationals, aggregated by country. These concentrations have been explained using theories, such as region-bound FSAs which constrain the ability of multinationals to internationalize, as well as transactions costs which make doing business outside a multinational’s home market more costly. To date, there has been no analysis that focuses on the regional and global character of multinational activity destined for China. This paper works to fill that void. Using data on FDI into China from each investor country over the period 1995–2005, this paper documents a significant regional concentration of Asian multinational activity operating within China. This regional concentration is sustained even after the special relationships with Hong Kong and (other) Offshore Financial Centres are accounted for. The evidence therefore extends the evidence of regional concentrations of MNE activities found elsewhere to China and its relationship with Asia.

Have China’s FDI Policy Changes Been Successful in Reducing Its FDI Regional Disparity?

From the very beginning of China’s open door policy in 1979, China’s preferential FDI polices have generally favored the coastal provinces, which has led to a pronounced regional disparity in FDI. Since 1992, the Chinese government has implemented a series of polices to reduce FDI regional disparity and diversify inward FDI to Western and Central provinces. This article uses a regression–based approach to assess the contribution of China’s preferential FDI policy changes toward FDI regional disparity. Our results suggest that the contribution of China’s regionally preferential FDI polices in inward FDI disparity decreased from 24 percent in 1990 to 13 percent in 2005. China’s preferential FDI policy changes dominate all the other factors in reducing China’s inward FDI regional disparity during this period.

Spatial Econometric Analysis of Determinants and Strategies of FDI in Russian Regions in Pre- and Post-1998 Financial Crisis Periods

Using a spatial autoregressive model of cross-sectional and panel data, we study the determinants and dominant strategies of FDI inflows into Russia before and after the 1998 financial crisis. The important determinants of FDI inflows into Russian regions since transition began appear to be market size, the presence of large cities and sea ports, oil and gas availability, and political and legislative risks. Since 1998, it appears the importance of big cities, the Sakhalin region, oil and gas resources and legislation risk has increased, while the importance of political risk and port availability has decreased. Our results also reveal a shift from horizontal FDI strategy to a regional trade-platform FDI strategy. While theory anticipates combined vertical and horizontal motives for regional trade-platform strategies, the lack of evidence of a vertical motive in the Russian case suggests import substitution presently plays a significant role in regional trade-platform FDI. Using a multiple spatial lags approach, we show that neighbouring regions with ports have emerged post-crisis as competitors for FDI and identify agglomeration effects in FDI between adjacent regions with and without ports during the period 1999-2002.

Local productivity spillovers from foreign direct investment in the U.K. electronics industry

The paper examines whether productivity spillovers from foreign direct investment are geographically limited. Using plant-level data from the U.K. electronics sector, it finds robust evidence of both intra-industry and inter-industry spillovers from regional FDI. By contrast, it fails to establish any discernible relationship between domestic plant's productivity and FDI outside the region.

Interstate Competition Policies and the Regional Convergence Hypothesis: A Framework of Analysis of Regional FDI Inflows

The present paper shows that regional FDI inflows (on the approval basis) conform to a regional divergence process where already rich states in terms of existing manufacturing bases (or gainers in terms of per capita income) are the gainers. This makes the interstate competition policy irrelevant in the sense that (1) incentives independent of growth centers do not play role in attracting FDI inflows; (2) incentives should form the part and parcel of regional policies that try to develop manufacturing bases in backward regions via growth centers.