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.

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.

scholarly journals Opportunities and challenges of foreign direct investment utilisation and its impact on construction sector in developing countries

2018 ◽  
Vol 23 (2) ◽  
pp. 239-256 ◽  
Author(s):  
Solomon Olusola Babatunde ◽  
Oluwaseyi Alabi Awodele ◽  
Onaopepo Adeniyi
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Knowledge Spillovers ◽  
Archival Data ◽  
Construction Sector ◽  
Fdi Inflows ◽  
Content Type ◽  
Scant Attention ◽  
Major Factors

Purpose Foreign direct investment (FDI) inflows to both developed and developing countries have increased over the past three decades. However, investigation of opportunities and challenges associated with FDI on the host economy and its impact, especially on the construction sector through empirical assessment, have received scant attention. The purpose of this study is to address this gap in knowledge within the Nigerian context and examine the trend of FDI inflows to the construction sector for the period 2000-2013 inclusive. Relationships between contributions of the construction sector to Nigeria’s gross domestic product (GDP) are also studied. Design/methodology/approach The study adopted a literature review, a questionnaire survey and archival data culminated in data analysis. The survey targeted financial experts in Nigerian financial institutions/local banks. Archival data included the annualised data extracted from the Central Bank of Nigeria statistical bulletins. The period examined witnessed stable economic conditions. Data collected were analysed using mean score, factor analysis and correlation. Findings Eight identified opportunities of using FDI were grouped into three principal factors: knowledge spillovers, capital for new investment and resilience during financial crises. The ten identified FDI challenges were grouped into three major factors: loss of ownership advantage and additional costs, crowding-out of-national firms and administrative bottleneck and overdependence. Based on the hypotheses tested, the study found a significant relationship between the contributions of FDI inflows in the construction sector and the total GDP of the host country. Practical implications This study provides greater insight on the effects of FDI on a host economy in developing countries, which would help policymakers to examine existing policies and look for new ways of increasing foreign investment flow, especially in the area of Construction Facility Investment. Originality/value This study is important because it would enable policymakers in developing countries at large to promote FDI with special considerations for the construction sector of the economy.

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.

scholarly journals Technology-sourcing investment abroad as an enhancer of Chinese MNEs’ innovative capabilities

2015 ◽  
Vol 10 (2) ◽  
pp. 243-271 ◽  
Author(s):  
Philippe Gugler ◽  
Laura Vanoli
Keyword(s):  
Foreign Direct Investment ◽  
Citation Analysis ◽  
Direct Investment ◽  
Multinational Enterprises ◽  
Knowledge Diffusion ◽  
Technological Capabilities ◽  
Content Type ◽  
Chinese Mnes ◽  
Firm Knowledge ◽  
Innovative Capabilities

Purpose – The purpose of this paper is to focus on Chinese firms’ innovation processes that are induced by foreign direct investment abroad. The study uses a patent and citation analysis to examine the extent to which investments abroad contribute to enhancing these firms’ innovative capabilities. More specifically, this study focusses on the role of foreign location competitiveness as an asset to provide technological capabilities to Chinese affiliates. Design/methodology/approach – Patents are good indicators of firms’ innovative capabilities. Moreover, patents allow to track the inter-firm knowledge transfer through the citations of patents on which they are based. The authors use an OECD patent database called “OECD REGPAT July 2013” that compiles patents registered with the European Patent Office (EPO) over the period from 1986 to 2013. The authors focus the analysis on patents registered by Chinese multinational enterprises’ (MNEs) based in Europe because the authors assume inter alia that innovations patented by Chinese affiliates in Europe are registered with the EPO. The sample comprises 3,010 patents involving 5,749 citations that the authors have individually examined. Findings – The findings suggest that Chinese MNEs ability to generate innovation based on their own knowledge is low, with a self-citation rate of approximately 4 percent. Patents by Chinese MNEs are largely based on foreign patents, especially from developed economies (at least 90 percent). The citation analysis also suggests that 39.2 percent of citations represent domestic firms in the local recipient country. This subgroup of citations is categorized as follows: 1.04 percent are M&A linkages, 13.8 percent are cluster linkages, and 24.36 percent are localization linkages. The remaining 60.8 percent of the total sample demonstrates that firms do not necessarily need to be collocated in foreign locations with domestic firms to exchange assets. Research limitations/implications – Patent and citation analysis considers only a part of the inter-firm knowledge diffusion. Some innovations are not patented and tacit knowledge diffusion is not observable. Moreover, the analysis focusses only on Chinese outward foreign direct investment to Europe, but a large part of knowledge is accumulated in China thanks to inward foreign direct investment. Originality/value – Many scholars have scrutinized emerging markets multinational enterprises’ strategic asset-seeking investments abroad that are designed to upgrade the companies’ technological capabilities (Cui and Jiang, 2009; Zhang and Filippov, 2009; Huang and Wang, 2013; Amighini et al., 2014; De Beule et al., 2014; Nicolas, 2014). However, few studies analyze the results of these strategies in terms of innovation output.

Neither side is ready to step back in Georgian crisis

2021 ◽  
Keyword(s):  
United States ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Prime Minister ◽  
The United States ◽  
Content Type ◽  
Eu Membership ◽  
National Movement ◽  
Election Victory ◽  
Political Turmoil

Significance The authorities went ahead with the arrest of Nika Melia, leader of the opposition United National Movement (UNM), on February 23 even after the prime minister resigned in protest. Georgian Dream's actions have caused concern in Western capitals that approved its election victory when the opposition cried foul. Impacts The crisis is a setback for the government's stated plan to apply for EU membership in 2024. There is growing talk in the United States about individual sanctions targeting Ivanishvili and his associates. Political turmoil will harm hopes of foreign direct investment and the imminent Anaklia port tender.

India’s vaccine diplomacy brings money and influence

2021 ◽  
Keyword(s):  
United States ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Manufacturing Sector ◽  
The United States ◽  
Active Pharmaceutical Ingredients ◽  
Content Type ◽  
Pharmaceutical Ingredients ◽  
The World

Significance Last week, its partners in the ‘Quad’ grouping -- the United States, Japan and Australia -- agreed to help increase its vaccine manufacturing and exporting capacity. Each of the Quad members is wary of China, which like India is gifting and selling coronavirus jabs around the world. Impacts India’s manufacturing sector will attract more foreign direct investment. Greater cooperation over supply chains will help strengthen India-Australia ties. Indian pharma will in the long term aim to ease dependence on imports of active pharmaceutical ingredients from China.

Does foreign direct investment influence R&D activity in the host country? Evidence from Vietnam

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Van Ha ◽  
Mark J. Holmes ◽  
Gazi Hassan
Keyword(s):  
Foreign Direct Investment ◽  
Foreign Investment ◽  
Direct Investment ◽  
Probit Model ◽  
Innovation Activity ◽  
Heckman Selection Model ◽  
Content Type ◽  
Domestic Firms ◽  
The Impact ◽  
Local Firms

PurposeThis study focuses on the linkages between foreign direct investment and the research and development (R&D) and innovation activity of domestic enterprises in Vietnam.Design/methodology/approachThe Heckman selection model approach is applied to a panel dataset of nearly 7,000 Vietnamese firms for the 2011–2015 study period to investigate the impact of foreign presence on the R&D of local firms through horizontal and vertical linkages. Probit model estimation is employed to examine how foreign investment influences the innovation activity of local companies.FindingsWhile there are a small number of firms carrying out R&D activities in Vietnam, foreign or joint domestic–foreign venture firms are less inclined than domestic firms to undertake R&D. Domestic factors that include capital, labor quality, location and export status of firm have a significant effect on the decision of domestic firms to participate in R&D activity. Only forward linkages and the gross firm output are found to have an impact on the R&D intensity of domestic enterprises, while other factors appear to have no significant influence on how much firms spend on R&D activities.Practical implicationsIn order to promote the R&D activity of domestic firms, policy should focus on (1) the backward linkages between local firms in downstream sectors with their foreign suppliers in upstream sectors, and (2) the internal factors such as labor, capital or location that affect the decisions made by domestic firms.Originality/valueGiven that foreign investment may affect R&D and innovation activity of local firms in host countries, the impact is relatively unexplored for many emerging economies and not so in the case of Vietnam. The availability of a unique survey on Vietnamese firm technology and competitiveness provides the opportunity to address this gap in the literature.

The determinants of foreign direct investment: what about the potential of the Arab Maghreb countries?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hamdi Khalfaoui ◽  
Abdelkader Derbali
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Political Stability ◽  
The United States ◽  
Investment Risk ◽  
Content Type ◽  
Foreign Companies ◽  
Main Determinants ◽  
General Method Of Moments

Purpose The purpose of this paper is to elucidate the main determinants of foreign direct investment (FDI) in the case of the Arab Maghreb countries. Design/methodology/approach We employ a dynamic panel analysis using the General Method of Moments for a sample composed of 105 countries over the period 1985–2018. Findings We show that FDI stability, market size, higher education enrolment, quality of institutions, distance, sharing of common border, and bilateral investment and integration agreements are the main determinants of FDI location. These determinants are neither general. The potential for attracting FDI from AMU countries is poorly exploited. FDI to the AMU is lower than estimated stock. The observed FDI to potential FDI ratio does not exceed 87%. France and Spain are the main investors in the AMU region thanks to historical and cultural links. The FDI from the United States, Canada, Germany, Belgium, and Japan are below what is expected. Originality/value The contribution of this paper is observed on the examining oh the determinants of the FDI in the Arab Maghreb countries. Our study demonstrate that the political stability can decrease investment risk in these countries. The administrations correspondingly require expanding their rules and strategies with union demonstrations which were at the beginning of the departure and closing of several foreign companies.

Does foreign direct investment spillover total factor productivity growth? A study of Indian drugs and pharmaceutical industry

2017 ◽  
Vol 24 (7) ◽  
pp. 1937-1955 ◽  
Author(s):  
Nitin Arora ◽  
Preeti Lohani
Keyword(s):  
Foreign Direct Investment ◽  
Pharmaceutical Industry ◽  
Total Factor Productivity ◽  
Direct Investment ◽  
Spillover Effect ◽  
Foreign Firms ◽  
Factor Productivity ◽  
Content Type ◽  
Domestic Firms ◽  
Tfp Growth

Purpose Foreign firms have certain advantages which may spillover to domestic firms in the form of improvements in total factor productivity (TFP) growth. The purpose of this paper is to empirically observe the presence of TFP spillovers of foreign direct investment (FDI) to domestic firms through analyzing source of TFP growth in Indian drugs and pharmaceutical industry. Design/methodology/approach This paper examines the sources of TFP spillovers of FDI in Indian drugs and pharmaceutical industry over the period 1999 to 2014. The data of 304 firms has been used for estimation of the growth rates of TFP and its sources under stochastic frontier analyses based Malmquist productivity index framework. For frontier estimation, the Wang and Ho (2010) model has been executed using translog form of production function. Findings The results show that there exists significant TFP spillover effect from the presence of foreign equity in drugs and pharmaceutical industry of India. The results also show that the major source of TFP fluctuations in the said industry is managerial efficiency that has been significantly affected by FDI spillover variables. In sum, the phenomenon of significant Intra-industry (horizontal) efficiency led productivity spillovers of FDI found valid in case of Indian drugs and pharmaceutical industry. Research limitations/implications The number of foreign firms is very less to imitate the significant impact of foreign investment on TFP growth of Indian pharmaceutical industry at aggregated level; and the Wang and Ho (2010) model is failing to capture direct impact of FDI on technological change under Malmquist framework. Practical implications Since, there exists dominance of domestic firms in Indian drugs and pharmaceutical industry, the planners should follow the policy which not only attract FDI but also benefit domestic firms; for example, developing modern infrastructure and institution which will further help domestic firms to absorb spillovers provided by the Multinational Corporations and also accelerate the growth and development of the economy. Social implications In no case, the foreign firms should dominate the market share otherwise the efficiency spillover effect will be negative and the domestic firms will be destroyed under the self-centric approach of foreign firms protected by the recent patent laws. Originality/value The study is a unique attempt to discuss the production structure and sources of TFP spillovers of FDI in Indian drugs and pharmaceutical industry with such a wide coverage of 304 firms over a period of 16 years under Wang and Ho (2010) model’s framework. The existing studies on TFP spillovers are using either a small sample size of firms or based upon traditional techniques of measuring spillover effects.

scholarly journals Impact of foreign direct investment, remittances and official development assistance on economic growth: panel data approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amna Zardoub ◽  
Faouzi Sboui
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Foreign Direct Investment ◽  
Panel Data ◽  
Direct Investment ◽  
Development Assistance ◽  
Business Environment ◽  
Official Development Assistance ◽  
Financial Flows ◽  
Content Type

PurposeGlobalization occupies a central research activity and remains an increasingly controversial phenomenon in economics. This phenomenon corresponds to a subject that can be criticized through its impact on national economies. On the other hand, the world economy is evolving in a liberalized environment in which foreign direct investment plays a fundamental role in the economic development of each country. The advent of financial flows – FDI, remittances and official development assistance – can be a key factor in the development of the economy. The subject of this article is to analyses the effect of financial flows on economic growth in developing countries. Empirically, different approaches have been employed. As part of this work, an attempt was made to use a panel data approach. The results indicate ambiguous effects and confirm the results of previous work.Design/methodology/approachThe authors seek to study the effect of foreign direct investment, remittances and official development assistance (ODA) and some control variables i.e. domestic credit, life expectancy, gross fixed capital formation (GFCF), inflation and three institutional factors on economic growth in developing countries by adopting the panel data methodology. Then, the authors will discuss empirical tests to assess the econometric relevance of the model specification before presenting the analysis of the results and their interpretations that lead to economic policy implications. As part of this work, the authors have rolled panel data for developing countries at an annual frequency during the period from 1990 to 2016. In a first stage of empirical analysis, the authors will carry out a technical study of the heterogeneity test of the individual fixed effects of the countries. This kind of analysis makes it possible to identify the problems retained in the specific choice of econometric modeling to be undertaken in the specificities of the panel data.FindingsThe empirical results validate the hypotheses put forward and indicate the evidence of an ambiguous effect of financial flows on economic growth. The empirical findings from this analysis suggest the use of economic-type solutions to resolve some of the shortcomings encountered in terms of unexpected effects. Governments in these countries should improve the business environment by establishing a framework that further encourages domestic and foreign investment.Originality/valueIn this article, the authors adopt the panel data to study the links between financial flows and economic growth. The authors considered four groups of countries by income.

Sign in / Sign up

Export Citation Format

Share Document