Role Of Foreign Direct Investment Research Articles

FDI impact: catalyzing digital capabilities in host nations

Purpose This study aims to investigate the impact of foreign direct investment (FDI) on national digital capability, specifically differentiating the impact between FDI greenfield and mergers and acquisitions (M&A). The research also investigates factors shaping digital capabilities, encompassing government transparency and absorptive capability, while exploring the mediating influence of absorptive capability in the FDI–digital capability relationship. Design/methodology/approach An econometric model has been developed to examine the interrelationship between national digital capability, FDI inflows, national absorptive capability and government transparency. The data set encompasses 55 countries over a period of nine years (2013–2021). National digital capability data is derived from the well-established index published by the World Competitive Centre (WCC). The sources of the explanatory variables align with standard practices, drawing from reputable institutions (UNCTAD and the World Bank, among others). Findings The findings reveal a significant positive impact of FDI, particularly in greenfield investments, on national digital capability. Government transparency and research and development (R&D) investment are crucial factors contributing to digital capabilities. Additionally, the absorptive capacity, reflected by R&D investment, also emerges as a potential moderating factor, influencing the impact of FDI inflows on digital capabilities. Practical implications The results recommend that policymakers and stakeholders should carefully consider the role of FDI, especially in greenfield investments, as a catalyst for enhancing national digital capability. The findings also underscore the significance of promoting government transparency and directing investments towards R&D to nurture digital capabilities. Moreover, understanding the mediating role of absorptive capability can inform strategies aimed at optimizing the impact of FDI on digital capabilities. Originality/value This study contributes uniquely to the existing literature by being the first to systematically explore the influence of FDI on national digital capability. Furthermore, it presents innovative empirical findings on the role of absorptive capability in enhancing the FDI impact on national digital capability, an area that remains relatively uncharted in current literature.

Do natural resources bestow or curse the environmental sustainability in Cambodia? Nexus between clean energy, urbanization, and financial deepening, natural resources, and environmental sustainability

The management and utilization of natural resources can either promote or hinder environmental sustainability. While they can provide the basis for renewable energy, sustainable agriculture, and conservation efforts, their extraction and use can also lead to environmental degradation, pollution, and depletion. This study examines the intricate relationship between natural resource rent (NRR) and environmental sustainability in Cambodia. Specifically, the study investigates the impacts of financial openness, institutional quality, financial deepening, and urbanization on this relationship. Employing both symmetric and asymmetric frameworks, the research assesses the explanatory power of these variables on environmental sustainability. Study implemented novel cointegration test offered by Bayer-Hancked and Makki, the long-run and short-run coefficients has derived through the implementation of augmented autoregressive Distributed Lagged (AARDE) and Nonlinear Autoregressive Distributed Lagged (NARDL). The study reveals the long-term association between NRR and environmental indicators, additionally the findings uncover both positive and negative correlations between NRR and environmental sustainability, emphasizing the challenge of managing natural resources effectively. Furthermore, the study highlights the potential adverse environmental effects of financial expansion, suggesting that increased investment in certain industries and higher consumption patterns may exacerbate environmental degradation. It also underscores the role of foreign direct investment (FDI) in promoting renewable energy technologies and sustainable practices, ultimately reducing CO2 emissions. Additionally, the study stresses the importance of institutional quality and transparent financial systems in encouraging sustainable practices and mitigating carbon emissions. It advocates for Cambodia to prioritize institutional strength and financial openness to achieve long-term environmental sustainability, while addressing the challenges posed by financial deepening and urbanization.

Factors affecting the green economy: the mediating role of foreign direct investment

PurposeThe objective of this study is to examine the various factors that exert an influence on the green economy. This study also investigates the impact of foreign direct investment (FDI) on the Malaysian economy, specifically focusing on its position as a mediator. This research also examines the correlation between FDI and its influence on the contemporary green economy.Design/methodology/approachThe authors employed quantitative methodologies and a self-administered survey to evaluate data and derive a definitive conclusion. The result was constructed using SPSS and SEM-PLS as the analytical software.FindingsThe study reveals that technological advancement, investment country and government policy significantly and positively affect the green economy, catalyse SDG goals and restructure the economy in better shape.Originality/valueThe current empirical research bridges the research gap in the context of technology advancement in government policy from emerging economies by exploring important factors, proposing their impact on the performance of the green economy, and empirically testing those hypothesized relationships. This study deciphers that FDI influences the green economy, where the investment country plays a significant role. Also, for a graphical presentation of this abstract, see the online appendix.

Navigating the climate challenges in Africa: Exploring the synergy and threshold effects of renewable energy and foreign direct investment on climate risk

Renewable energy is widely acknowledged as an essential response to climate change, which poses a severe threat to humanity and natural ecosystems. Drawing from the greenhouse theory of climate change and the pollution haven hypothesis, this study contributes to the literature by addressing three critical issues. First, we examine the effect of renewable energy on climate risk. Second, we explore the intervening role of foreign direct investment (FDI) on the renewable energy-climate risk nexus. Third, we determine the minimum threshold required for renewable energy to minimise climate risk. The analysis was based on 47 African countries and estimated using the generalised method of moments (GMM) and dynamic panel threshold regression techniques. The GMM technique is essential due to its ability to address endogeneity issues in the model. Also, the dynamic panel threshold technique is employed because it is built on the principles of GMM and provides an estimate of the threshold level and nonlinearities in the model. The empirical evidence presents a significant negative relationship, suggesting that renewable energy minimises the surge in climate risk in Africa. Second, the findings reveal that the weakening effect of renewable energy on climate risk is contingent on FDI. Third, the dynamic panel threshold results demonstrate that the minimum threshold required for renewable energy to reduce climate risk is 56%. Beyond this level, renewable energy presents a significant negative impact, implying that high renewable energy consumption lessens climate risk. Policy recommendations for boosting renewable energy consumption to alleviate climate risk have been provided.

Exploring the role of green finance in wind power development: using the nonparametric model

In the context of the “dual carbon” strategy, how to leverage green finance to promote China's wind power industry is a hot topic. Unlike existing literature, this article uses a nonparametric additive model to investigate the impact and mechanism of green finance on wind power development. Research has found that green finance has an inverted U-shaped nonlinear impact on wind power development, indicating that green finance has a more prominent contribution to the wind power industry in the early stages. Further mechanism research indicates that green finance affects the wind power industry through foreign direct investment and green technology innovation. Specifically, with the relaxation of foreign direct investment conditions in the energy sector, the role of foreign direct investment in promoting the wind power industry more prominent in the later stages. In the early stages, government support was greater, and green technology patents grew rapidly, driving green technology innovation to have a more significant impact on the wind power industry. In addition, the impact of fiscal decentralization, wind power prices, and environmental regulations on the wind power industry also exhibits significant nonlinear characteristics. This article helps to comprehensively understand the mechanism and impact of green finance on wind power development, and provides a reliable basis for optimizing green finance policy and effectively promoting wind power.

Good Governance and Tourism in South Asian Emerging Economies: The Mediating Role of Foreign Direct Investment

This study examined the role of good governance in promoting tourism in emerging South Asian countries and also tested the mediating role of foreign direct investments (FDI). The study used panel data collected from seven South Asian countries from 1996 to 2018. Panel data regression models were estimated to test the research hypotheses. The results showed that the country’s good governance has a positive and significant influence on tourism receipts and arrivals. Moreover, the mediation analysis results supported that foreign direct investments mediated the relationship between good governance indicators like government effectiveness, political stability, voice and accountability, and control over corruption and tourism. Based on the results, the study proposed the governance-led FDI and FDI-led tourism hypotheses, the study’s main contribution. The study has implications for the government regulatory agencies relating to governance, tourism departments, foreign prospect investors, and policymakers.

The role of foreign direct investment in east and Southeast Asia: Evidence before and after 2009 global financial crisis

This research investigates the influence of Foreign Direct Investment (FDI), domestic physical stock, and the human capital index on labor productivity across 17 East and Southeast Asian economies. In the period from 1980 to 2009 (pre-global financial crisis), the study reveals that, initially, FDI stock independently contributes little to productivity. It underscores the necessity of specific human capital thresholds for FDI to enhance productivity by facilitating technology diffusion from source to host economies. While most economies in our sample surpass these thresholds, Cambodia, Laos, and Myanmar do not, indicating unexploited potential for productivity enhancement via FDI. In the post-2009 era, following the financial crisis, FDI emerges as the primary driver of labor productivity in these economies, rendering the previously mentioned human capital thresholds less critical across all 17 economies. The study also observes a significant, mutually intensifying crowding-out effect between FDI stock and domestic physical capital, which notably escalated around the 2009 financial crisis. Despite this, the influence of FDI stock on labor productivity substantially surpasses that of domestic physical capital, especially after 2009. These insights underscore the critical need for policymakers to strategically balance the influx of foreign investment with domestic capital investment to optimize economic growth in the aftermath of the 2009 crisis.

Unveiling the green horizon: A bibliometric analysis of global foreign direct investment research and its emphasis on climate change

Foreign direct investment (FDI) promotes economic growth of a country in multiple ways by setting up industries, infrastructure, and power plants, and such activities usually accelerate climate change by raising greenhouse gases (GHG) emissions. While the research on the role of FDI in promoting economic growth has gained widespread attention, it remains largely unclear how much global FDI research focuses on climate change activities. To fill this gap, a global scale bibliometric analysis was conducted to quantify published research on FDI, including the share dedicated to climate change. Global FDI research was heavily focused on non-climate change issues contributing 85% share in publications (13,835 publications) and 78% in citations (3,70,000 citations) and minimal attention was paid to FDI research relevant to climate change (2438 publications, 1,07,478 citations). Even with less publications, the research impact (RI; citations pre document) of FDI-climate change studies was 62% higher than non-climate change studies. Global FDI research was mainly concentrated in a few countries, with only 15 countries publishing approximately 75% of FDI research. China, USA, and UK combined produced approximately half (47%) of the global FDI research. The institutions and funding agencies from China, USA, and UK contributed greatest number of FDI publications and collaborated widely with rest of the world. However, China, Pakistan and Turkey produced 57% of global publications on FDI-climate change. Though developing countries are the major recipients of FDI and are most vulnerable to climate change, but their contributions towards climate change research were minimal. The most recent (2019–2023) topic trends for FDI research were green finance, renewable energy, economic growth, trade, and FDI. However, the recent topic trends for FDI-climate change research were green finance, clean energy, FDI, carbon emission, and carbon dioxide emission. FDI and climate change activities are generally positively correlated. Therefore, global research should upsurge its focus on FDI related climate change activities in order to find ways to improve economies sustainably without damaging environment.

The role of foreign direct investment in technology development in Vietnam

The role of foreign direct investment in technology development in Vietnam

Role of foreign direct Investment and political openness in boosting the eco-tourism sector for achieving sustainability

This study aimed to examine the impact of China’s political openness index and foreign direct investment on its ecotourism index from 1985 to 2019. The findings revealed that a 1% rise in foreign direct investment had a long-term effect, increasing China’s sustainable tourism index by 0.01%. Furthermore, the political openness index played a significant role in boosting ecotourism in China over both short and long periods. A 1% increase in the political openness index corresponded to a 0.32 and 0.53% increase in China’s ecotourism index in the short and long term, respectively. Additionally, the financial openness index had a positive impact in the short and long term, with a 1% improvement resulting in approximately 0.24 and 0.23% increases in China’s ecotourism index. Key policies to advance eco-tourism in China include ensuring political stability, enhancing green financial markets through fintech and blockchain, and implementing poverty alleviation measures.

Persistent US Current Account Deficit: The Role of Foreign Direct Investment

Persistent US Current Account Deficit: The Role of Foreign Direct Investment

The role of foreign direct investments in the developing of banking sector

The important factor of a stable economy undoubtedly remains foreign direct investment (FDI), which helps in the establishment and economic, social and overall development of a country. Corporations that decide to invest their capital abroad of the country of origin, obviously require the destination country to have an organizational economic viability and attractive and suitable legal space. Meanwhile, the factors that affect the size, structure, benefits, costs and role of the banking sector of FDI in the economy of Kosovo will be objects of analysis of this paper. In addition to these issues, we will present the real situation of FDI in general during the last years in Kosovo, the origin of the respective countries from which these investments come and their economic activity scope. For the writing of this paper, the method of secondary data analysis and comparative method were used. Mainly, we have used the publications of the Central Bank of Kosovo (CBK), such as Financial Stability Reports and Monthly Information Reports of the Financial System. In this paper, it is concluded that FDI makes the main contribution to the development of the banking sector in Kosovo as well as in developing countries.

Role of Foreign Direct Investment in India’s Agribusiness

Role of Foreign Direct Investment in India’s Agribusiness

THE IMPACT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH IN UZBEKISTAN

The article is devoted to the role of foreign direct investment in promoting economic growth in Uzbekistan. The growth of direct investment and its impact on the level of income and the quality of the institutional environment, the long-term and interrelated effects of growth on the level of national income in many developing countries and the economic growth of direct investment in Uzbekistan are studied.

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.

The role of foreign direct investment and green technologies in facilitating the transition toward green economies in Latin America

This study investigates the role of foreign direct investment (FDI) in facilitating the transition toward low carbon societies in Latin America from 1990 to 2022, in order to investigate the effects of FDI among the green transition process and contribute to the design of new ad hoc green FDI policies. Additionally, we introduce the Low Carbon Transition Curve hypothesis as a framework for understanding the relationship between income and the transition to green economies in the selected countries. Through the application of cointegration regression analysis, preceded by the examination of unit roots and cointegration, we uncover notable findings. Our results indicate that the impact of FDI on the consumption of renewable energy exhibits heterogeneity across Latin American countries, as evidenced by the lack of statistical significance in the renewable/fossil fuel mix consumption of energy. However, it is important to note that FDI has a positive and significant effect on the promotion of renewable energy consumption. Furthermore, our analysis confirms the statistical significance of the income-low carbon transition hypothesis across all regression models, suggesting that income per capita plays a pivotal role as a driving factor in countries' transition to green economies. In light of these findings, it is recommended that countries utilize FDI to reduce their dependency on fossil fuels by offering incentives for green FDI, which can contribute significantly to the transition process. These practical implications can guide decision-making processes and support the implementation of measures that contribute to a more sustainable and environmentally conscious energy sector in Latin America.

UNPACKING THE RELATIONSHIP: FDI, ECONOMIC GROWTH, AND SERVICE SECTOR VALUE ADDITION IN GHANA

This study delves into the intricate relationship between Foreign Direct Investment (FDI), economic growth, and service sector value addition in Ghana, aiming to provide insights into the dynamics shaping the country's economic landscape. Ghana has witnessed a surge in FDI inflows in recent years, particularly in the service sector, which has become a key driver of economic development. Through a comprehensive analysis of macroeconomic data and sector-specific trends, this research explores the impact of FDI on economic growth and the value addition within the service sector. Employing quantitative methods and econometric modeling, the study examines the causal relationships and dynamics among FDI, GDP growth, and service sector value addition. The findings shed light on the role of FDI in stimulating economic activity, fostering innovation, and enhancing productivity within the service sector, thereby contributing to overall economic growth and development in Ghana.

The Role of Foreign Direct Investment on Economic Growth in Tanzania: Empirical Evidence from Emerging Sectors

The study analyzed whether foreign direct investment in emerging sectors (“transport and storage”, “Real estate”, “information and communication” and “Electricity and gas”) can influence economic growth in Tanzania. In order to analyze time series data from 1999 to 2020, the study employed dickey-fuller and Philips peron tests for stationarity, ARDL bound test for co-integration, Auto Regressive Distributed Lag (ARDL) model to estimates long run relationship and then diagnostic tests were applied to check validity and reliability of variables. The study revealed among sectors under study FDI inflow in transport and storage sector contribute positively to economic growth while FDI inflow to other sectors have insignificant impact to economic growth. Thus, in order to combat such outcomes, the government is advised to attract more foreign investment to the sectors with undesirable impacts with productive strategies in order to improve sectors performance on economic growth through establishment of favorable investment policies to create conducive investment environment.

Country-of-origin effects on technology transfer in foreign direct investment

This study investigates the role of foreign direct investment (FDI) and its country-of-origin in technology transfer. Using data of 95 countries from 2008 to 2019, results indicate that net inflows of the FDI are positively related to technological transfer especially in developing countries. This is consistent with the findings that show fewer resources endowed countries benefited from advanced technologies and management know-how. Furthermore, results suggest different country-of-origin affects the technology transfer of the host economy differently. These results are consistent with studies that suggest the FDI origins are crucial to expose firms with variety of technologies and management practices. Results from quantile analysis prove that there is an existence of a threshold for the developed and developing countries to gain from the country-of-origin of the FDI. Therefore, we need to relook at the investment policies of the host countries to maximize the benefits from different sources of FDI.

Do Foreign Direct Investment Inflow and Trade Openness Influence International Tourism Demand in Africa? A Study of the Post-Global Financial Crisis Era

Following the paucity of evidence on the roles of foreign direct investment (FDI) inflow and trade openness in Africa’s tourism development, particularly in the post-Global Financial Crisis era, this study examined the roles of FDI inflow and trade openness as drivers of international tourism demand in Africa. We also investigated how infrastructural development, terrorism, climatic conditions, and institutional quality influence the FDI-tourism and trade openness-tourism relationships in Africa. The system GMM modeling framework and a panel of 42 African countries were used. We find that FDI inflow has not contributed significantly to the growth of tourism demand in Africa. However, infrastructure and climatic conditions on the continent have the potential to positively influence the FDI-tourism relationship, while terrorism hampers it. We also find that trade openness impacts positively on international tourism demand in Africa, but this impact is mainly insignificant. The study made some policy recommendations based on these findings.