Institutional quality and its impact on the facilitation of foreign direct investment

2019 ◽  
Vol 12 (3) ◽  
pp. 167-188
Author(s):  
Fuzhong Chen ◽  
Guohai Jiang ◽  
Wenting Wang
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Institutional Quality ◽  
Data Set ◽  
Impact Mechanism ◽  
Content Type ◽  
Extant Literature ◽  
Belt And Road ◽  
The Impact ◽  
The Belt And Road

Purpose Improvements in the facilitation of foreign direct investment (FDI) through institutional quality play a significant role in the establishment of an open economy. However, the impact of institutional quality on the facilitation of FDI along the Belt and Road countries is not well explored. This study aims to empirically investigate the influence of institutional quality on the degree of FDI facilitation and explore the impact mechanism using national-level panel data from countries along the Belt and Road. Design/methodology/approach For the data set, all variables have been normalized, and principal component analysis has been used. For the empirical models, robust standard errors and dynamic GMM method have been used to alleviate heteroscedasticity and endogeneity. Findings The empirical results indicate that institutional quality has a significantly positive effect on the degree of FDI facilitation. Furthermore, the impact mechanism involves the mediating mechanism. In other words, the effect of institutional quality that promotes FDI facilitation is influenced by factors such as laws and regulations. In addition, the implementation of the Belt and Road Initiative (BRI) has significantly enhanced the promotional effect of institutional quality on the facilitation of FDI. Practical implications Policymakers should focus on improving the institutional quality and the influence of mediating mechanisms, such as policies and regulations, in the institutional environment. Originality/value This study contributes to extant literature on the impact of institutional quality on FDI facilitation of significance to China, the BRI countries, and other countries to facilitate openness in international investment. This study also contributes to the extant literature on the influence of the BRI on the development of BRI countries. This will inform policy makers, investment institutions and enterprises about the development of effective policies to aid the development of BRI countries and improve the efficiency and the returns on FDI.

Does the origin matter? The effects of cross-border mergers and acquisitions in France

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Federico Carril-Caccia
Keyword(s):  
Foreign Direct Investment ◽  
Mergers And Acquisitions ◽  
Direct Investment ◽  
Developed Countries ◽  
Emerging Countries ◽  
Intangible Asset ◽  
Data Set ◽  
Content Type ◽  
Cross Border ◽  
The Impact

PurposeThe present article analyses the effects of cross-border mergers and acquisitions (CBM&As) on targets' total factor productivity (TFP), employment, wages and intangible-asset investment. The author investigates whether the impact of CBM&As differs depending on the origin of the investing multinational (MNE). The author distinguishes between CBM&As from European countries, other developed countries and emerging countries.Design/methodology/approachThe author makes use of a unique firm-level data set of foreign direct investment in the French manufacturing sector. The authors applies propensity score matching and difference in differences to estimate the effect of CBM&As.FindingsThe results show that the consequences of CBM&As differ strongly depending on the origin. CBM&As from European MNEs have a positive impact on TFP, wages and intangible-asset investment, and those from emerging countries seem to increase wages and intangible-asset investments. In contrast, CBM&As that originate from MNEs from other developed countries do not have a significant effect.Originality/valueThis article contributes to the growing literature on the effects of foreign direct investment that highlights the relevance of accounting for the MNEs' origin. In particular, it is the first to address the impact of emerging-country MNEs' CBM&As in Europe.

Institutional quality and foreign direct investment in Ghana

2020 ◽  
Vol 30 (1) ◽  
pp. 109-122 ◽  
Author(s):  
Ibrahim Nandom Yakubu
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Institutional Quality ◽  
Principal Component ◽  
Political Stability ◽  
Single Measure ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact

Purpose This paper aims to investigate the impact of institutional quality on foreign direct investment (FDI) in Ghana for the period 1985-2016. Design/methodology/approach The study uses the autoregressive distributed lag (ARDL) approach to examine the relationship between institutional quality along with other controlled variables and FDI. Findings Evidence from the ARDL framework establishes a positive significant effect of institutional quality on FDI irrespective of the time horizon. The results also reveal a significant impact of inflation on FDI in both short and long run, while GDP per capita growth and trade are significant determinants only in the short run. Practical implications The study recommends the instigation of effective policies and strategies that seek to strengthen the quality of institutions, as this provides a conducive investment climate to attract FDI. Specifically, policies that are focused on promoting transparent legal regimes, regulatory reforms, non-corrupt institutions and political stability should be the precedence of policymakers. Originality/value In addition to being a pioneering work on the impact of institutional quality on FDI in Ghana, the main contribution of the study lies in its application of the principal component analysis to generate a single measure of institutional quality based on a number of institutional factors.

scholarly journals Exploration of the Impact of China’s Outward Foreign Direct Investment (FDI) on Economic Growth in Asia and North Africa along the Belt and Road (B&R) Initiative

2021 ◽  
Vol 13 (4) ◽  
pp. 1623
Author(s):  
Alnoah Abdulsalam ◽  
Helian Xu ◽  
Waqar Ameer ◽  
AL-Barakani Abdo ◽  
Jiejin Xia
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Trade Openness ◽  
Ordinary Least Squares ◽  
Host Countries ◽  
African Countries ◽  
Belt And Road ◽  
The Impact ◽  
The Belt And Road

This empirical study has examined the impact of Chinese investments, namely infrastructure, energy, services, other investment sectors, and trade openness on the economies of the 25 Asian and North African countries along with the Belt and Road (B&R) Initiative for a period of 2007 to 2016 using the Johansen Fisher Panel Cointegration Test, Panel Dynamic Ordinary Least Squares (PDOLS) model, and the Toda and Yamamoto technique for testing causality. The findings revealed cointegration among the variables and that the impact of Chinese investments on economic growth in the host countries is positive, but it has a weaker effect, to a certain extent, in all sectors of the host countries while trade openness positively impacts the countries. Furthermore, there is evidence of a unidirectional causality between some FDI (foreign direct investment) economies while the investment in services and other sectors does not cause economic growth in the host countries. Based on the results, the paper proposes that the host countries increase the FDI in the sector of infrastructure, energy, and technology to enhance their economies.

scholarly journals The Impact of FDI on Economic Openness of Provinces along "the Belt and Road"

2021 ◽  
Vol 233 ◽  
pp. 01170
Author(s):  
Maoguo Wu ◽  
Yuting Zhang
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Positive Impact ◽  
Total Import ◽  
Economic Openness ◽  
Distribution Of Resources ◽  
Belt And Road ◽  
Foreign Invested Enterprises ◽  
The Impact ◽  
The Belt And Road

The implementation of "the Belt and Road" initiative has further enhanced China’s economic openness and attracted more foreign direct investment (FDI). However, China is characterized by unbalanced economic development and distribution of resources in different regions. Therefore, analyzing the impact of FDI on economic openness of 18 provinces along "the Belt and Road" and developing the economies of these provinces more specifically have become an important issue. This paper uses factor analysis and DEA-Malmquist model to construct the economic openness of 18 provinces. FDI proxied by 5 measurements are selected to evaluate the impact of foreign direct investment on each province’s economic openness by using spatial econometric model. Empirical results find that FDI has a positive impact on the economic openness of the provinces along "the Belt and Road", and the surrounding provinces also have a significant role in promoting the economic openness of a province. But FDI has different impact on different regions with East Region exhibiting the most significant effect. FDI enhances economic openness mainly through registered capital of foreign-invested enterprises and total import and export of foreign-invested enterprises.

scholarly journals Does China’s Outward Direct Investment Improve the Institutional Quality of the Belt and Road Countries?

2020 ◽  
Vol 12 (1) ◽  
pp. 415 ◽  
Author(s):  
Chunyang Pan ◽  
William X. Wei ◽  
Etayankara Muralidharan ◽  
Jia Liao ◽  
Bernadette Andreosso-O’Callaghan
Keyword(s):  
Sustainable Development ◽  
Direct Investment ◽  
Resource Curse ◽  
Institutional Quality ◽  
Political Stability ◽  
Data Set ◽  
Belt And Road ◽  
Outward Direct Investment ◽  
The Belt And Road

This article investigates the effects of China’s outward direct investment (ODI) on the institutional quality of the Belt and Road (B&R) countries. Based on a panel data set of 63 B&R countries during the period 2003 to 2016, we find that China’s ODI improves the institutional quality of B&R countries not only in the short run but also in the long run. Further, although China’s ODI exerts no differential impacts on host country institutional dimensions of “control of corruption,” “government effectiveness,” and “political stability” in countries with different natural resource endowments, it improves their institutional dimensions of “regulatory quality” and “rule of law,” implying that China’s ODI may help the host B&R countries minimize the “resource curse”. As one of the most important strategies for China’s opening-up development in the current era, the B&R initiative serves as means to promote sustainable development of B&R countries. The article therefore contributes to existing scholarship on the institutional effects of China’s ODI and sheds light on the mechanisms that drive sustainable development.

scholarly journals The impact of economic growth, FDI, and innovation on environmental efficiency of the logistics industry in provinces along the belt and road in China: An empirical study based on the panel Tobit model

2021 ◽  
Vol 104 (2) ◽  
pp. 003685042110180
Author(s):  
Mingde Guo ◽  
Hong Li ◽  
Wen Lin
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Tobit Model ◽  
Chinese Economy ◽  
Environmental Efficiency ◽  
Logistics Industry ◽  
Belt And Road ◽  
The Impact ◽  
The Belt And Road

Due to the high-quality development of the Chinese economy, the improvement of environmental efficiency in Chinese industries has become a significant task. Understanding the environmental efficiency of the logistics industry is essential for implementing effective environmental policies. This study aims to explore the impacts of economic growth, foreign direct investment (FDI), and innovation on the environmental efficiency of the logistics industry. In this paper, we apply the undesirable SBM model to calculate the environmental efficiency of the logistics industry and use the Tobit model to analyze the impacts of economic growth, foreign direct investment (FDI), and innovation on the environmental efficiency of the logistics industry in provinces along the Belt and Road in China from 2009 to 2018. Based on the results indicate the average environmental efficiency of the logistics industry in Chinese provinces along the Belt and Road is 0.7880, indicating that the environmental efficiency of the logistics industry was generally low in some regions along the belt and road. Innovation and FDI were found have a significant impact on the environmental efficiency, while economic growth fails to significantly impact on the environmental efficiency of the logistics industry in provinces along the Belt and Road. Therefore, we should encourage improvement of the level of environmental efficiency of the logistics industry. It is necessary to realize the co-ordinated development of the logistics industry and the environment through optimization of the development of innovation and transforming the FDI model in provinces along the Belt and Road.

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