scholarly journals Does foreign direct investment enhance or inhibit regional innovation efficiency?

2018 ◽  
Vol 12 (1) ◽  
pp. 35-55 ◽  
Author(s):  
Zheng Li ◽  
Jun Li ◽  
Bin He
Keyword(s):  
Foreign Direct Investment ◽  
Absorptive Capacity ◽  
Direct Investment ◽  
Spillover Effects ◽  
Policy Implications ◽  
Regional Innovation ◽  
Regional Variations ◽  
Content Type ◽  
Complementary Assets ◽  
Key Aspects

Purpose The purpose of this paper is to examine whether foreign direct investment (FDI) inflow impacts on regional innovation efficiency in China and whether the impacts of FDI are contingent on regional conditions that may maximize the effect of FDI on regional innovation efficiency. Design/methodology/approach Using panel data of 30 provinces from 2000 to 2010, the authors first used data envelopment analysis to measure regional innovation efficiency, followed by a spatial panel model to test research hypotheses concerning the effect of FDI on regional innovation efficiency and the direct and moderating effects of regional characteristics such as regional innovation environment, regional absorptive capacity and regional complementary assets. Findings The paper finds that there are considerable inter-regional and intra-regional variations in innovation efficiency in China and that regional variations in innovation efficiency in China can first be explained by the differences in inflow FDI and then be accounted for by the direct and moderating effect of regional innovation environment, absorptive capacity and complementary assets. Research limitations/implications The research findings have three policy implications. First, governments should continue their efforts to increase the transparency and predictability of the framework for inward FDI and align FDI with the region’s strategic priorities of development to improve innovation efficiency. Second, governments should develop holistic and coherent policies that address the key aspects of regional conditions conducive to the inflow of FDI. Third, governments at the regional level should cultivate an open innovation environment and support the development of financial markets to maximize the positive effect of FDI technology spillover and externalities. Originality value This paper fills a gap in research on the spatial heterogeneity characteristics of spillover effects of FDI on regional innovation efficiency.

Is the Ukrainian economy’s absorptive capacity appropriate to attract foreign direct investment and facilitate economic growth?

2018 ◽  
Vol 13 (6) ◽  
pp. 1928-1947
Author(s):  
Svitlana Shevelova ◽  
Svitlana Plaskon
Keyword(s):  
Higher Education ◽  
Economic Growth ◽  
Human Capital ◽  
Foreign Direct Investment ◽  
Production Function ◽  
Transition Economies ◽  
Absorptive Capacity ◽  
Direct Investment ◽  
Content Type ◽  
Douglas Production Function

Purpose Despite an increasing volume of literature focussed on foreign direct investment (FDI) in transition economies, there has been little research into FDI in Ukraine. The relationship between the inflows of FDI (IFDI) and absorptive capacity (AC) has been under-researched in the peripheral transition countries like Ukraine. The purpose of this paper is to analyse the appropriateness of the Ukrainian economy’s AC to attract IFDI and facilitate economic growth with a particular focus on AC factors, such as the potential of human resources to absorb innovation and benefit from research and development (R&D) expenditure. Design/methodology/approach This study presents a thoughtful research design: there is an analysis of the AC framework for justification and selection factors that allows a measurement of the potential of Ukraine’s AC to attract and exploit IFDI. The study uses data from 25 regions in Ukraine for the 1996–2015 period. To estimate the effects of IFDI on Ukrainian economic growth, a Cobb–Douglas production function is used. As an appropriate instrumentation technique for dynamic panel data, the Generalised Method of Moments is used to provide unbiased and efficient estimates of the results. The application of the interactive term in this study allows the authors to indicate the existence of complementarities between IFDI and human capital, in particular with higher education, that afford opportunity to absorb new technologies and benefit from IFDI. Findings The resulting model indicates that R&D expenditure benefited very significantly in evolving country’s innovation system due to economic growth. Physical and human capital has not been used effectively in Ukraine to facilitate economic growth and attract IFDI. The number of patents is not significant in all of the regression models. Moreover, IFDI in Ukraine for the 1996–2015 period did not significantly impact on economic growth. However, the AC of human capital, in particular those with a higher education, is relatively relevant to benefit from IFDI. Practical implications The findings have important implications for governmental policy, which should be based on improving the business climate, a strategy for digital development, innovation, migration, institutional and regional policies aimed at the achievement of country’s sustainable economic growth. The government should increase R&D expenditure as an important factor of gross domestic product growth and introduce grants, loans and other financial supports for encouraging students to continue university education. Originality/value The originality and value of this paper is empirical and methodological. The empirical results of this study enable a conclusion about the appropriate level of the country’s absorptive capability required to benefit from IFDI. The paper also contributes to the existing academic debate and proves that despite the well-established theoretical framework for the IFDI–AC economic impact context, a new theorisation is needed to explore the full complexity of the country’s explicit relationship between AC and IFDI. Future research should be focussed on examining not only groups of countries but also distinctly the country’s explicit relationship between AC and IFDI with the particular attention for the under-researched countries: the peripheral transition economies to discover new research niches for theory building. This study presents an original methodological approach with a careful justification of the theoretical framework for hypothesis development, an appropriate sample and an original application of seminal research methods based on the Cobb–Douglas production function. This study proves that the interactive term, which allows indication of the existence of complementarities between IFDI and other variables, is appropriate for measuring AC in countries with smaller amounts of IFDI.

Foreign Direct Investment

2017 ◽  
pp. 239-257
Author(s):  
Kijpokin Kasemsap
Keyword(s):  
Foreign Direct Investment ◽  
Absorptive Capacity ◽  
Direct Investment ◽  
Global Economy ◽  
Spillover Effects ◽  
Advanced Technology ◽  
Foreign Investor ◽  
The World ◽  
External Capital ◽  
Management Techniques

This chapter indicates the overview of Foreign Direct Investment (FDI); FDI entries and export; FDI and spillover effects; FDI, human capital, and absorptive capacity; and the significance of FDI in the global economy. FDI is an investment in a business by an investor from another country for which the foreign investor has control over the company purchased. FDI offers a source of external capital and increased revenue. FDI can be a tremendous source of external capital for the developing countries, which can lead to economic development. Through FDI, capital goes to whatever businesses have the economic growth anywhere in the world. FDI helps in increasing the output through the utilization of advanced technology and management techniques. FDI benefits investors, businesses, and the global economy. FDI contributes to foreign exchange earnings, employment creation, and the increases in incomes in the global economy.

Understanding foreign direct investment in Indonesia

2016 ◽  
Vol 15 (1) ◽  
pp. 28-50 ◽  
Author(s):  
Sasidaran Gopalan ◽  
Rabin Hattari ◽  
Ramkishen S. Rajan
Keyword(s):  
Foreign Direct Investment ◽  
Data Analysis ◽  
Direct Investment ◽  
Policy Implications ◽  
Fdi Inflows ◽  
Content Type ◽  
Greenfield Investments ◽  
The Government ◽  
Data Investigation ◽  
Existing Data

Purpose This paper aims to examine the dynamics of foreign direct investment (FDI) inflows into Indonesia. It is interested specifically in analysing and deliberating on two important policy questions: First, are all kinds of FDI useful from a policy perspective and what does the existing data on FDI reveal about the type of FDI inflows into Indonesia? Second, does the existing data help understand the extent of de facto bilateral linkages between Indonesia and other countries? Design/methodology/approach The paper offers an in-depth case study of Indonesia using extensive exploratory data analysis on FDI inflows into Indonesia. As discussed in the paper, the data investigation uses and reconciles available FDI data both from national and international sources to understand the usefulness of such data for policy analysis. Findings A data investigation of the trends in different types of FDI flows reveals a discernible downward trend in the ratio of mergers and acquisitions (M&A)–FDI ratio over the years. The paper argues that from a sequencing perspective, while a medium-to-long-term framework encouraging both domestic and foreign Greenfield investments could help Indonesia regain its growth luster, in the near term much more attention needs to be paid to FDI inflows in the form of M&As. Further, reconciling FDI and M&A data might help identify the original sources of FDI flows because existing data are based on flow of funds rather than ultimate ownership. Practical implications Since the Asian financial crisis, Indonesia has successfully embarked on a phase of economic and political transition post-Suharto, with the cornerstones of such a strategy being a process of greater democratisation and decentralisation. However, there have been growing concerns of economic growth stagnation in recent years. One of the policies to revive the economy’s lustre adopted by the government has been to attract greater FDI inflows. In this light, this paper examines the dynamics of FDI into Indonesia and deliberates on what kinds of FDI policymakers should focus on attracting to restore the country’s growth lustre. Originality/value The question of whether a policy to attract FDI should be careful in distinguishing the kind of FDI it wants to attract has not been sufficiently addressed in the related literature. This paper provides a framework to understand the different macroeconomic policy implications of types of FDI and provides extensive data analysis to not only understand the types of FDI but also sources of bilateral FDI inflows to Indonesia by reconciling FDI and M&A data.

Knowledge spillovers from inward foreign direct investment in the banking industry

2017 ◽  
Vol 55 (9) ◽  
pp. 2053-2072 ◽  
Author(s):  
Chong-Hoe Kim ◽  
Byung Il Park
Keyword(s):  
Foreign Direct Investment ◽  
Survey Data ◽  
Absorptive Capacity ◽  
Direct Investment ◽  
Banking Sector ◽  
Knowledge Spillovers ◽  
Competitive Pressure ◽  
Worker Mobility ◽  
Content Type ◽  
Demonstration Effect

Purpose The purpose of this paper is to pinpoint key conduits promoting knowledge spillovers through inward foreign direct investment in the banking sector. Design/methodology/approach The data were obtained by a survey. The survey data were collected from managers of five major local banks in Korea. The survey was conducted during May 10-June 30, 2015 with a total of 581 self-administered responses finally collected at the end (response rate: 60.5 percent). Findings Based on the survey data collected from the survey, the results indicate that knowledge spillovers from foreign to local banks occur in the Korean context. Demonstration effect, worker mobility and absorptive capacity of local banks are found to be effective conduits for knowledge spillovers. In addition, the authors have also found that competitive pressure negatively influences worker mobility leading to knowledge spillovers while two other elements (i.e. demonstration effect and absorptive capacity) positively mediate the relationship between competitive pressure and knowledge spillovers. Practical implications It is essential for the managers of multinational banks vigorously consider placing a strong emphasis on security of internal information and management of own personnel as the knowledge outflow through the demonstration effect and worker mobility is critical. For the managers of local banks, the discoveries suggest that active investment in human resources to maximize knowledge spillovers through the demonstration effect and through absorptive capacity is heightened by building an internal knowledge base. Originality/value The study contributes to the extant literature in the field of international business in two key ways. First, it examines the knowledge spillovers in the banking sector, a regulated industry, in Korea where empirical research is sparse. This paper’s second contribution is the finding of the key conduits of knowledge spillover phenomena by predicting and identifying the elements which affect the magnitude of knowledge flows from foreign to local banks.

Financial development and natural resources nexus in Egypt: the role of clean energy sources and foreign direct investment

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dalia M. Ibrahiem ◽  
Rasha Sameh
Keyword(s):  
Foreign Direct Investment ◽  
Natural Resources ◽  
Financial Development ◽  
Direct Investment ◽  
Clean Energy ◽  
Policy Implications ◽  
Energy Sources ◽  
Content Type ◽  
The Impact ◽  
Quantity Of Education

Purpose Achieving the goals of the sustainable development strategy and Egypt’s vision 2030 depends mainly on the existence of sources of funds. And since Egypt faces a great challenge in obtaining finance, then analyzing the drivers of financial development is a vital issue and there is a persistent need to shed light on the key obstacles for it. Thus, this paper aims to empirically assess the impact of natural resources, foreign direct investment (FDI) net inflows, education and clean energy sources on financial development in Egypt using the data of the 1971–2014 period. Design/methodology/approach The paper uses auto-regressive distributed lag and Toda-Yamomoto approaches to fulfill the purpose. Findings Empirical results signify that all variables except natural endowments stimulate financial development which can suggest the presence of the natural resources curse in Egypt. Moreover, the feedback effect between financial development and FDI is recognized. Clean energy sources cause financial development and natural endowments. Financial development causes natural endowments and FDI leads to the deployment of more clean energy resources. Practical implications Several crucial policy implications are suggested based upon these results as improving the quality and quantity of education and encouraging both domestic and foreign investors by providing several incentives. Moreover, the government has to enhance green finance through financing solar energy projects and other environmentally friendly projects. Originality/value It is the first research for Egypt that explores natural resource-financial development nexus using time series analysis according to our information, and two important variables are included in the model which is clean energy sources and FDI. Then, although several studies examined the impact of financial development on clean energy no empirical study before assessed the impact of clean energy on financial development.

Foreign direct investment and growth: Can different regional identities shape the returns to foreign capital investments?

2017 ◽  
Vol 35 (8) ◽  
pp. 1483-1508 ◽  
Author(s):  
Laura Casi ◽  
Laura Resmini
Keyword(s):  
Social Capital ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Spillover Effects ◽  
Informal Institutions ◽  
Policy Implications ◽  
Foreign Firms ◽  
Production Plant ◽  
Generalized Trust ◽  
Foreign Presence

In this paper we argue that informal institutions, or more generally, what is called social capital, can act as one of the mediating factors determining the size and the direction of foreign direct investment-induced spillovers on growth and productivity at regional level. The idea is that when a foreign firm sets up a new production plant in a location, the nature and the quality of its relationships with local workers and firms are affected by the endowment of social capital of that location. A ‘wrong’ social capital may make these relationships difficult, thus limiting the capacity of the host economy to convert foreign direct investment-induced spillovers into local competencies conducive to growth. We operationalized informal institutions in terms of generalized trust, associational activity, and cultural closeness and we found that spillover effects do not arise: (1) when generalized trust is too ‘self-referential’, (2) the level of associational activities is low, and (3) cultural closeness towards foreigners and external culture dominate the society. We also found that foreign presence is not universally beneficial, since positive spillovers are associated with EU-originating foreign firms and foreign direct investment in services only. These results have policy implications for the EU regions. In order to maximize the returns from foreign direct investment, the issue of the origin of foreign investors as well as the sectoral composition of foreign direct investment inflows should be carefully considered. Furthermore, investments in education may help regions to benefit more from the foreign presence because human capital and social capital are likely to be complementary.

Foreign direct investment and innovation in Estonia

2013 ◽  
Vol 8 (2) ◽  
pp. 231-248 ◽  
Author(s):  
Jaan Masso ◽  
Tõnu Roolaht ◽  
Urmas Varblane
Keyword(s):  
Foreign Direct Investment ◽  
Production Function ◽  
Open Economy ◽  
Direct Investment ◽  
Small Open Economy ◽  
Policy Implications ◽  
Community Innovation Survey ◽  
Content Type ◽  
Innovation Output ◽  
The Impact

PurposeThe aim of this paper is to study the linkages between inward and outward foreign direct investment (FDI) and the innovation inputs and outputs of domestic and foreign owned companies in Estonia, a small economy in CEE.Design/methodology/approachThe econometric analysis of the data about the linkages between FDI and innovation is made using the model by Crépon et al., which allows estimation of the innovation expenditure equation, the knowledge production function (with various innovation output variables as dependent variables) and the productivity equation (production function), with all the equations including company and industry level FDI variables.FindingsThe results show that the higher innovation output of foreign owned companies vanishes after various company characteristics are controlled for, but there were significant differences in innovation inputs such as the higher use of knowledge sourcing and the lower importance of various impeding factors. Outward investment has a positive influence on innovativeness among both domestic and foreign owned companies.Practical implicationsThe managers can benefit from this study by tapping into a wider range of knowledge sources via diverse and active involvement in exporting and investing activities. Often they fail to realise that initiation of international activities can also serve as an important learning opportunity in becoming more innovative. The policy implications suggest that government policies as well as triple helix cooperation should be oriented not only towards attracting foreign interest, but also towards building opportunities for more extensive regional and international business networking by exporting and outward FDI.Originality/valueThe originality of the study lies in the usage of the data from a small open economy of Central and Eastern Europe. This region is a good candidate for studying the impacts of FDI; while CEE countries were closed to FDI before the onset of transition, since the beginning of transition they have witnessed massive FDI inflows. The present study seems to be one of the first ones to use three different waves of the Community Innovation Survey (CIS), specifically CIS3 covering 1998‐2000, CIS4 (2002‐2004) and CIS2006 (2004‐2006). Thereby the authors are able to study the impact of the changing economic environment on the link between FDI and innovativeness.

scholarly journals Taking stock of firm-level and country-level benefits from foreign direct investment

2018 ◽  
Vol 26 (2) ◽  
pp. 126-144 ◽  
Author(s):  
Randolph L. Bruno ◽  
Nauro F. Campos ◽  
Saul Estrin
Keyword(s):  
Foreign Direct Investment ◽  
Emerging Economies ◽  
Direct Investment ◽  
Meta Analysis ◽  
Spillover Effects ◽  
Empirical Literature ◽  
Firm Level ◽  
Content Type ◽  
Country Level ◽  
Enterprise Level

Purpose This paper aims to conduct a systematic meta-analysis on emerging economies to summarize these effects and throw light on the strength and heterogeneity of these conditionalities. Design/methodology/approach This paper proposes a new methodological framework that allows country- and firm-level effects to be combined. The authors hand collected information from 175 studies and around 1,100 estimates in Eastern Europe, Asia, Latin America and Africa from 1940 to 2008. Findings The two main findings indicate that “macro” effects are much larger than enterprise-level ones, by a factor of at least six and the benefits from foreign direct investment (FDI) into emerging economies are substantially less “conditional” than commonly thought. Originality/value The empirical literature has not reached a conclusion as to whether FDI yields spillovers when the host economies are emerging. Instead, the results are often viewed as conditional. For macro studies, this means that the existence and scale of spillover effects are contingent on the levels of institutional, financial or human capital development attained by the host economies. For enterprise-level studies, conditionality relates to the type of inter-firm linkages, namely, forwards, backwards or horizontal.

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