Regional Foreign Direct Investment Research Articles

Environmental Regulation, Foreign Direct Investment, and Green Total Factor Productivity: An Empirical Test Based on Chinese City-Level Panel Data

Environmental regulation is a crucial tool for government intervention in the field of green technology innovation. It can boost an enterprise’s competitiveness and encourage green technology innovation, both of which have a major effect on luring foreign investment. This paper first systematically elaborates on the relationship between environmental regulation, foreign direct investment (FDI), and green total factor productivity (GTFP) and then combines panel data from Chinese cities to empirically test these relationships using various methods, such as the mediation effect model, two-stage least squares, and difference-in-differences method. The study found that environmental regulation significantly boosts FDI and GTFP. FDI helps to improve GTFP, and environmental regulation can impact GTFP indirectly through FDI. The way that FDI and environmental regulations affect GTFP demonstrates regional variation. Large cities with high economic growth gain more from environmental regulation. FDI has a stronger promotion effect on GTFP in medium- and small-sized cities than in large-sized cities, and it does not significantly impact GTFP in cities with high levels of economic development or in the eastern region.

Analysıs of Foreıgn Direct Investment Policies and of the Performance of FDI Flows into Türkiye

The purpose of this paper is to overview Foreign Direct Investment (FDI) policies and legal framework over the years in Türkiye and analyze the performance of FDI inflows to the country by using total and sectoral FDI data over the period 1970-2022. With the recognition of positive spillover effects of FDI in bringing foreign exchanges, as well as new technologies, managerial and marketing skills to domestic industries, Türkiye opened its economic activities to foreign capitals by adopting liberal FDI laws and regulations in 1980, 1989, 2003 and 2012. Our study shows that immediately after these years, both aggregate FDI inflows and their sectoral distributions in Türkiye has changed dramatically. For instance, after the implementation of the FDI law in 2003, the service sector attracted the most of total FDI inflows.

FDI inflows and export quality: Domestic competition and within-firm adjustment

Product quality is widely regarded as an important determinant for economic development. This paper investigates whether horizontal foreign direct investment (FDI) improves or deteriorates the quality of domestic firms’ exports. We use China’s FDI regulation changes in 2002 as an instrument variable (IV) for FDI penetration in China to identify the causal impact and introduce a theoretical model to rationalize our empirical work. We find that FDI inflows exert a significantly negative effect on Chinese firms’ export quality. The mechanism of the negative effect is that FDI intensifies the domestic market competition, which induces within-firm adjustment of product mix and lowers domestic firms’ incentive to invest in the quality of new products. In particular, while domestic firms drop some existing products and introduce new products, they invest less in the quality of new products and maintain the quality of continuing products.

Targeted Liberalization: China's foreign investment regulation reform and its post‐WTO‐accession export surge

AbstractTo gain membership in the World Trade Organization (WTO) in 2001, China substantially modified its regulation of foreign direct investment. These reforms coincided with rapid changes in the composition of capital inflows, as the dominant entry mode shifted from joint venture to wholly foreign owned affiliate. Foreign‐invested enterprises contributed a rising share of China's rapidly growing exports. We investigate how much China's foreign ownership liberalization contributed to these observed trends in foreign investment flows and Chinese exports. Accounting for both the set of activities from which it removed foreign equity caps and those into which it newly encouraged investment, we estimate the impact of China's reforms on firm entry and exports using a difference‐in‐differences estimator. To eliminate bias resulting from heterogeneous and dynamic treatment effects, we also apply novel dynamic difference‐in‐differences estimators. We find that removal of foreign equity caps induced entry of wholly foreign owned firms, while having no significant effect on entry of new joint ventures. Concurrently, the designation of new activities for investment incentives induced foreign entry, particularly in the form of joint ventures. Reduced‐form calculations imply that FDI policy changes explain almost 9% of the increase in exports from foreign‐invested firms over the decade studied. The effect was larger in sectors identified as “high‐tech industries” by the Chinese government, as they contribute most of the estimated policy‐driven export growth from foreign‐invested firms. Thus, China's FDI regulation reform following WTO entry was targeted liberalization: elimination of equity share limits induced new foreign entry, while investment incentives encouraged formation of joint ventures.

Effects of mining sector FDI, environmental regulations, and economic complexity, on mineral resource dependency in selected OECD countries

Mineral resources are pivotal in boosting a country's foreign direct investment and economic complexity; nevertheless, their exploitation should be regulated by implementing environmental policies governing economic activities. Thus, current study explores the quantile-dependent association of mineral resource dependency with the mining sector's foreign direct investment (FDI), economic complexity, and environmental regulations for selected OECD economies. The OECD nations comprise developed and developing zones; thus, their importance regarding mineral resource dependency is immensely vital. The annual data from 2004 to 2021 has been taken and Method of Moments Quantile Regression (MMQR) is employed after a preliminary investigation of the panel series. The outcomes revealed that mining sector FDI and economic complexity exert pressure on resources in low- and high-resources-dependent countries. In comparison, environmental regulations reduce mineral resource dependency. A bi-directional causality is documented between mining sector FDI, economic complexity and environmental regulations. This study also applies Generalized Method of Moments (GMM) and Feasible Generalized Least Square (FGLS) to address reverse causality and cross sectional dependency. Notably, a two way relationship is confirm using causality test between FDI, economic complexity, environmental regulations, and mineral resources. Robustness estimators confirm the prior estimations and offer relevant policy implications.

НОВЫЕ ТЕНДЕНЦИИ В ГЛОБАЛЬНЫХ ПОТОКАХ ТРАНСГРАНИЧНЫХ ПРЯМЫХ ИНВЕСТИЦИЙ

The article examines measures, that took place in the regulation of foreign direct investment and their impact on the configuration of investment flows. It is noted that for some countries and economic unions in current geopolitical situation, FDI policy is becoming a part of the national strategy for economic security and technological sovereignty. The dynamics of the introduction of FDI restrictive and regulatory measures indicates an increase in protectionism, which leads, in particular, to a reconfiguration of global capital flows. The changes in the FDI inflows /outflows volumes and in their distribution by different regions and countries allow us to conclude that, on the one hand, the localization of a part of FDI within geopolitically close states is taking place, while on the other hand, in order to reduce political and economic risks the diversification of investment partners is going on

The Regulation of Foreign Direct Investment in Bolivia: Some Current Challenges

The Regulation of Foreign Direct Investment in Bolivia: Some Current Challenges

Trade liberalization, regional trade openness degree, and foreign direct investment:Evidence from China

This paper investigates the relationship among trade liberalization, the degree of trade openness (DTO) and regional foreign direct investment (FDI) using Chinese data for 2001–2018 by hand collection. We apply the fixed effect model and find that both trade liberalization and regional DTO have a significantly positive relationship with regional FDI. Furthermore, a variable coefficient model is used to prove that the effects of trade liberalization on regional FDI are heterogeneous across regions. Finally, we use the threshold model to prove the significant threshold effects of DTO on the relationship of trade liberalization and FDI. This paper provides theoretical and policy support for countries with obvious regional differences to attract FDI.

The resource curse in least developed countries: The roles of foreign direct investment, energy efficiency, and electricity access

Extensive research exists on the link between natural resource rents and GDP growth, yet the roles of Foreign Direct Investment (FDI) and energy efficiency are less studied. As such, this study aims to bridge this research gap by investigating the relationship among natural resource rents, FDI, and GDP growth in the context of the Least Developed Countries (LDCs). In addition, the potential influences of energy efficiency and electricity access are considered. Using time-series methodologies like the Augmented Dickey-Fuller (ADF) unit root test with structural breaks, Bayer-Hanck Cointegration, and regression methods such as FMOLS, DOLS, and CCR, the study explores the defined variables. Robustness checks are conducted using Robust and Simple Least Squares without breaks. The results reveal that most variables, barring mineral rents and long-run cointegration between growth and explanatory variables, are stationary at first difference D(1). Findings show that LDCs are susceptible to the resource curse, with forest and mineral rents and FDI negatively impacting economic growth. However, enhanced energy efficiency and electricity access can foster sustained growth in LDCs. The robustness check results corroborate the primary findings. The study concludes by proposing policy recommendations for sustainable resource use, regulation of FDI, and improving energy efficiency and electricity access.

Cross‐border technology investments in recession

AbstractUtilizing industry‐level foreign direct investment (FDI) from 72 source markets to 122 destination markets between 2003 to 2018, we evaluate how cross‐border technology investments respond to economic recessions. We find that FDI embedded with intensive research and development (R&D) drops when the destination market is in a recession and the source market is in a normal state and recovers to the pre‐recession levels when both destination and source markets are in recession. However, there is little evidence that recessions affect cross‐border investments in other aspects of technology measured by the penetration of robots, intellectual property products and information and communications technology (ICT). The response of R&D‐intensive FDI to recessions is particularly pronounced in deep and long recessions, during the propagation stage of recessions and in destination markets with relatively weak institutional protection of intellectual property and rule of law, loose FDI regulation and high financial development. Our findings are limited to advanced markets: there is no evidence that R&D‐intensive FDI from or to emerging markets responds to either destination or source market recessions.

A STUDY OF SOME OBSERVATIONS OF FDI RULES AND POLICY ON E‐COMMERCE IN INDIA

This research paper delves into the intricate relationship between Foreign Direct Investment (FDI) rules and policies and the rapidly evolving landscape of e-commerce in India. The study aims to analyze the impact of FDI regulations on the growth, competitiveness, and structure of the Indian e-commerce sector. By examining historical developments, policy shifts, and their consequences, this research contributes to a comprehensive understanding of the dynamics between FDI and e-commerce in the Indian context.

Some Recent Trends and Implications of Foreign Direct Investment in Bangladesh

ABSTRACT: This study was carried out to evaluate the recent trends and implications of foreign direct investment (FDI) in Bangladesh. Due to its cost-effective workforce, potential market, rapidly growing economy, advantageous geographical location, and other pertinent factors Bangladesh has become one of the most enticing developing countries for foreign direct investment (FDI). Both quantitative and qualitative analyses were used. The trends and implication of FDI was assessed through different variables such as Net FDI inflow in Bangladesh, FDI inflows as percentage of GDP of Bangladesh, sectoral FDI inflow in Bangladesh, net FDI inflows from top 10 countries and by sectors, net FDI flow by EPZ and non-EPZ areas, no. of employment by FDI, FDI inflow by components, GDP, export, import, balance of payment, foreign exchange rate, inflation and corporate tax rate, which were then analyzed using different statistical measures, such as growth percentage, trend equations, the square of the correlation coefficient and correlation matrix. Thirteen trend equations and R-squared were tested for different relevant variables of FDI. To estimate the implication of FDI in Bangladesh, seven hypotheses has also been tested. Among them, the trend values were positive for eleven variables. The square of correlation coefficient (R-squared) of most of the equations is more than 0.7, indicating well fitted trend equations. According to the results of this analysis, FDI has positive correlation between GDP growth, exports, imports, employment in EPZs, and exchange rates. However, there is a significant negative correlation between corporate tax rate and inflation rate. By introducing beneficial FDI policies, providing substantial investment incentives, streamlining pertinent regulations, minimizing bureaucratic procedures, and through better infrastructure Bangladesh must act swiftly to entice more foreign investors. Despite adopting lenient FDI regulations, the government musthave to ensure facilities like more export processing zones, easy access to IT facilities, maintaining stable foreign exchange rates, encourage FDI from leading nations, an attracting new foreign investment source. By implementing these policies into practice, Bangladesh can boost up economic growth and may attract more FDI. This study proves that there is room for FDI to increase in the future and supporting economic growth of Bangladesh.

Role of FDI in Export Growth: A Comprehensive Review

Particularly in the era of globalization, foreign direct investment (FDI) has emerged as a critical engine of economic growth and development for many nations. This study intends to investigate how FDI supports export growth in both developed and developing countries. It explores how FDI influences export performance, including knowledge transfer, market access, production capacity, and spillover effects. The study covers the body of research, empirical studies, and case studies to analyze the link between FDI and export growth. Governments and investors may learn crucial lessons about improving FDI regulations and promoting global commerce by putting light on this issue. Keywords:- FDI, Export growth, Economic growth, development, etc.

Indonesian Model of Foreign Direct Inverstment (Omnibus Law)

Foreign direct investment (“FDI”) has become a hot topic in board meetings all over the world as modern businesses are seizing new opportunities within theglobalized economy. The modern economy functions ona larger scale than ever before, and companies are beginning to realize that failing to partake in foreigndirect investment could lead to their demise. FDI has been a key factor driving export-led growth in Southeast Asia. This research offers a comparative legal and critical analysis of the Foreign Direct Investment Regulation (FDI) and strategies of attracting FDI in Indonesia by learning from Singapore. Indonesia has been striving to attract FDI, and therefore on October2020 Indonesia ratified the Omnibus Law on JobCreation replacing 79 acts regarding investment. Nevertheless, this law has raised legal controversies andpublic protests. This research focuses finding a model ofFDI attraction for Indonesia through lessons learnedfrom Singapore in terms of how to attract FDI. Singapore have made remarkable FDI accomplishmentthrough their own ways. The result of this research isaims to deplore the reasons for the accomplishment, intending to find a better model for Indonesia than theOmnibus Law currently adopted. This research arguesthat Indonesia should reconsider the Omnibus Law approach by referring to the lessons learned from theexperience of Singapore’s success in attracting FDI.

More Integrated than Ever? Long-Term Market and Policy Drivers of Intra-Asian Trade

Since the Doha Round stalemate after 2001, trade liberalization has progressed through regional trade agreements (RTAs) and East and Southeast Asia is not unfamiliar with this. Before assessing the effectiveness of recent trade agreements, the long tradition of trade exchange in this region that has lasted for more than 2,000 years necessitates an understanding of the evolution of intra-Asian trade across history. In this regard, this study contributes to the literature examining whether present intra-Asian trade is more or less intense than before 1938. This research outperforms previous studies using a gravity model that controls for changes in GDP and trade costs in the region across four different time periods (between 1840 and 2018). The results show that contemporary regional trade in East and Southeast Asia is slightly less intense than before World War II. A second question addressed is the relevance of trade agreements after the 1985 Plaza Accord on trade integration, compared with market determinants. A second gravity model for regional imports after 1986 is regressed on both policy and market indicators, indicating that the latest wave of intra-Asian trade is characterized by trade complementarities that are fueled by regional foreign direct investment, and free trade agreements are less effective. This result is validated through a network analysis demonstrating the symbiosis between trade and investment flows in the region, which should be considered in RTAs that are in place or in negotiation to take intra-Asian trade beyond its historical limits.

O papel do Estado na regulação do investimento direto na China

ABSTRACT This article intends to corroborate the argument advocated by heterodox economists such as Akyüz, Chang and Furtado that state regulation is crucial to extracting the possible benefits of foreign direct investment (FDI). We do so by analyzing the policies used by China since its opening to this type of investment in 1979. The article innovates by scrutinizing China’s major FDI laws, regulations and guidelines that compose the formal framework under which foreign-owned enterprises have operated in the country for almost 40 years. We then address the traditional view that China developed simply because it increasingly opened its market to foreign investment and adopted a foreign investment-led growth model. We argue that it was because of this strong regulation that FDI had such a positive effect, contributing to technological transfer and trade expansion, although not defining the ratio of capital accumulation.

Impacts of the Belt and Road Initiative on regional outward FDI from China based on evidence from 2000 to 2015

Abstract Firms from different provinces in China and their different reactions to the Belt and Road Initiative (BRI) are studied in this research. Initial results from 27.547 outward foreign direct investment (FDI) projects by Chinese firms between 2000 and 2015 regarding the home region profile, host country choice, and FDI motives of the investment firms before and in the early years of the launch of the BRI policy are investigated. The findings show that Chinese firms from eastern provinces that have accumulated a large quantity of inward FDI are more likely than firms from western provinces to switch their investments to BRI-involved countries and engage in a more diverse set of outward FDI motives. These findings help interpret the behavior of Chinese multinationals in the current (de)globalization era, namely using the BRI to circumvent FDI barriers imposed by advanced western economies.

The impact of environmental regulations on foreign direct investment: a literature review

Foreign direct investment (FDI) is essential for the global economy, especially for developing and emerging countries, which are dependent on these financial resources. Governments compete to attract foreign investors by offering tax incentives, strong regulatory frameworks and flexible environmental regulations. While some countries relax environmental regulations to attract FDI, others implement stricter measures to reduce greenhouse gas emissions and protect the environment. The aim of this article is to present a thorough and up-to-date review of the literature that has focused on the analysis of the correlation between FDI and environmental regulations. The bibliometric analysis focuses on the main concepts that elucidate the relationship between environmental regulations and SDI, highlighting current trends and theories. This research is crucial for understanding the influence of environmental regulation on FDI and its effects on economic development and environmental conservation worldwide. According to the literature, the pollution haven theory has received substantial support, indicating that nations with permissive regulations attract more foreign direct investment due to lower business costs. The literature indicates strong support for the pollution haven theory, suggesting that countries with relaxed regulations attract more FDI due to lower business costs. The results of this study could help inform the development of environmental policies and strategies to attract foreign investment and address climate change and environmental degradation. At the same time, this research provides valuable information for researchers as it highlights the main research niches that need to be addressed and analysed.

Foreign Direct Investment and Air Pollution: Re-Estimating the “Pollution Haven Hypothesis” in China

This paper focuses on the relationship between foreign direct investment (FDI) and air pollution. Based on the relaxation of China’s FDI regulation policy as well as the “China Environmentally Extended Input-Output” database, we utilize a difference-in-differences methodology and investigate the casual effects of FDI liberalization on air pollution intensity. The empirical results demonstrate that FDI reduces the air pollution intensity. However, it is more pronounced in sectors with higher levels of absorption ability and human capital. The reduction in air pollution is mainly driven by technical effects through the enhancement of total factor productivity and technological efficiency. FDI can help achieve the green development goals in developing countries with a more liberalized policy.

The impact of FDI technology spillover on the innovation quality of Chinese enterprises: a microperspective based on geographic proximity

PurposePrevious studies have reached inconsistent conclusions on foreign direct investment (FDI) technology spillovers and corporate innovation. The main purpose of this paper is to explore the technological spillover effects of FDI from the microperspective of firm linkages induced by geographic distance. Further analysis is conducted on the impact and mechanism of this spillover on the innovation quality of Chinese enterprises. The conclusions drawn from this paper can guide Chinese enterprises' foreign capital utilization and innovation strategy choices.Design/methodology/approachUsing the data of China's A-share listed companies from 2009 to 2019, this paper explores the role of FDI technology spillover in enterprise innovation quality through a two-way fixed-effect model. The robustness of the results is proven by substituting variables, adding industry fixed effects and excluding high-profit groups, and further using the two-stage least squares (2SLS) method to alleviate the empirical endogeneity problem.FindingsThese findings indicate that FDI technology spillover based on geographic proximity has a positive impact on the innovation quality of Chinese enterprises. However, there are different impacts for different types of enterprises. FDI technology spillover has a positive impact on the innovation quality of non-state-owned enterprises (non-SOEs) and small- and medium-sized enterprises (SMEs), while it has no effect on state-owned enterprises (SOEs) and large enterprises. The authors also find that the degree of financing constraints and R&D investment are important transmission mechanisms between FDI technology spillover and enterprise innovation quality.Research limitations/implicationsThis study ignores industry characteristics when considering foreign enterprises around Chinese enterprises. In fact, technology spillover effects differ across industries. When the authors matched microdata to regions, only the provincial level was considered. Therefore, there is still room for further research. In future research, the authors should consider industry characteristics and group foreign enterprises and Chinese enterprises in the same industry and in different industries to explore industry differences in technology spillover. In addition, when matching corporate data to regions, the authors can match to the city level and draw city-level conclusions.Practical implicationsThis study is different from previous studies that focus on the quantity of enterprise innovation or innovation output. The authors focus on the role of technological spillovers in the quality of Chinese enterprise innovation, enriching research in the field of enterprise innovation quality. In addition, the current FDI technology spillover indicators are technically difficult to measure at the micro level. The authors draw inspiration from the theory of the geographical structure of financial supply and combine the creation methods of macro and micro indicators in existing articles in other fields. The authors ingeniously construct a new FDI technical spillover indicator. This indicator combines the commonly used regional FDI technology spillover with the geographic proximity of enterprises at the microlevel by constructing an interaction term between the two. This indicator not only alleviates the endogeneity problem to a certain extent but also has implications for future research in the field of FDI technology spillovers at the micro level.Social implications(1) FDI technology spillovers are an effective way to improve the innovation quality of local enterprises, especially for non-SOEs and SMEs. Therefore, The authors suggest that in the context of dual circulation, the Chinese government should continue to open wider to the outside world and encourage foreign enterprises to invest in China. (2) In future development, managers of SOEs and large enterprises should create an innovation incentive mechanism. Moreover, they should change their vertical management structure and make full use of their policy advantages and budget advantages to increase innovation activities. In the process of acquiring technology spillovers, enterprises need to solve their own financing constraints.Originality/valueFirst, this study solves a technical problem. It is technically difficult to measure the current FDI technical spillover indicators at the micro level. This study innovatively constructs a new FDI technology spillover indicator that combines regional FDI technology spillovers with the microperspective of the geographical proximity of enterprises. This approach not only alleviates certain endogeneity problems in the empirical evidence but also enriches relevant research in the field of technology spillover. In addition, this study focuses on the impact and mechanism of this spillover, which addresses the current research gap among previous studies that mainly focus on innovation quantity and ignore innovation quality.