A comprehensive analysis of foreign direct investment and economic growth

All three frameworks reveal a strong positive impact of FDI on economic growth. On average, economic growth appears to have been driven by FDI, human capital, domestic investment, openness to trade, and economic freedom. However, findings on the impact of growth on FDI are somewhat different across the three frameworks.

Foreign direct investment and exports : the experiences of Vietnam

We examined the implementation statuses of a total of 5,919 foreign direct investment (FDI) projects approved by the Vietnamese Ministry of Planning and Investment since 1988, and compiled a database of actually disbursed FDI in Vietnam. The database covers FDI flows into Vietnam from 23 countries from 1990 to 2004. Using the data, we analyzed the impact of FDI on the exports of Vietnam with gravity equations. The empirical results demonstrate that FDI is one of the major factors driving the rapid export growth of Vietnam. It has significantly facilitated the expansion of Vietnam's exports to FDI source countries. In particular, the empirical analysis shows that a 1 percent increase in FDI inflows will be expected to give rise to a 0.13 percent increase in Vietnam's exports to these countries.

Foreign direct investment in the Asia-Pacific region : overview of recent trends and patterns

APEC represents the world's most powerful economies. Although much trade related research has been undertaken on APEC countries, investment in the region is still not well understood. This paper provides an overview of FDI of selected APEC economies. Three main themes emerge from this review. First, APEC economies have experienced phenomenal growth in FDI over the last twenty years although such growth is uneven among countries. Second, FDI appears to shift from the primary sector into the manufacturing and tertiary sectors of the economy as economies grow further. Thus, future FDI in APEC economies will likely be relatively higher in the tertiary sector as the poorer members of APEC continue to grow. Third, FDI is found to contribute positively to economic growth in all economies considered although results show that FDI in the tertiary sector generally leads to higher economic growth.

Impacts of currency fluctuations on Japanese foreign direct investment

The Japanese currency has appreciated substantially against most other currencies over the last two decades. During the same time Japan has become one of the world's largest providers of FDI. Japan's share of total FDI outflows increased from about 6 percent during the late 70's to 21 percent in 1990 while its share of the total stock of FDI in the world increased from less than 1 percent in 1960 to more than 13 percent in 1993. Not surprisingly, Japan's role in international business in general and its FDI activities, in particular, have attracted considerable attention from researchers world wide. However, much of this attention has been directed towards the patterns and determinants of Japanese foreign direct investment, in particular to the United States. The impact of changes in the value of the Yen on Japanese FDI has been largely overlooked. Thus, this paper fills an important gap in the literature by focusing on the influence of changes of the exchange rate on Japanese foreign direct investment. A comprehensive simultaneous equa-tion model of Japanese FDI is developed on a regional level to gauge the extent to which currency fluctuations affect Japanese FDI activities. The results suggest that the exchange rate is an effective mechanism through which to influence FDI. Thus, the exchange rate should not be overlooked by the World Trade Organisation in its efforts to further liberalise investment through the Multilateral Agreement on Investment.

Foreign direct investment and the stages of sector diversification

Foreign direct investment (FDI), when considered homogenous, has case-specific result on sector diversification. However, FDI when disaggregated by its type, market-seeking FDI diversifies developed countries, while efficiency-seeking FDI diversifies developing countries, particularly in the manufacturing sector. Flexible labour markets and well-established financial markets also play important role in this context.

Localized learning by emerging multinational enterprises in developed host countries: a fuzzy-set analysis of Chinese foreign direct investment in Australia

Firms learn general international management and foreign market specific knowledge in their internationalization process. Firms' strategic emphasis on generalized vs. localized learning is an important yet underexplored issue in the extant literature. Drawing on the theoretical framework of dynamic capability, and in the context of emerging multinational enterprises' FDI into developed host countries, this study examines the equifinal process-position-path configurations of firms that will motivate them to engage in localized learning (as opposed to generalized learning). Utilizing primary and secondary data of eleven Chinese foreign direct investments in Australia, collected at both headquarters and subsidiary levels, we conducted fuzzy-set qualitative comparative analysis (fsQCA) that provided substantial support to our propositions. This study contributes to the internationalization process model by identifying equifinal process-position-path configurations, as well as their core and peripheral conditions that motivate localized learning at both the headquarters and the subsidiary levels.

Foreign direct investment and economic growth: A real relationship or wishful thinking?

Several theories have been advanced on the beneficial effect of foreign direct investment (FDI) on economic growth. However, mixed empirical findings have resulted in a long-standing debate. This study explores the global FDI-growth relationship through an 'informed' econometric analysis predicated on substantial guidance obtained from a detailed investigation of 880 estimates reported in 108 published studies. With model uncertainties alleviated and the core specification benchmarked against the aforementioned assessment, our econometric analysis, utilising a global sample of 140 countries in the period 1970 to 2009, conclusively documents that FDI positively affects economic growth. Moreover, we find that this association holds globally as strongly as in the developing world. Further, it is regional variation rather than within-country variation, and contemporaneous FDI rather than past FDI, which matters for growth. Finally, appropriate absorptive capacity indicators for positive growth are identified to be trade openness and financial development rather than schooling.

Foreign direct investment spillovers in Portugal: additional lessons from a country study

This paper investigates the impact of FDI on the productivity of Portuguese manufacturing sectors. Model specification is improved by considering the choice of the most appropriate interval of the technological gap for spillovers diffusion. We also allow for sectoral variation in the coefficients of the spillover effect; idiosyncratic sectoral factors are identified by means of a fixed effects model. Inter-sectoral positive spillover effects are examined. Significant spillovers require a proper technological differential between foreign and domestic producers and favourable sectoral characteristics. They may occur in modern industries in which the foreign firms have a clear, but not too sharp, edge on the domestic ones. Agglomeration effects are also one pertinent specific influence.