Using a panel dataset of bilateral flows of foreign direct investment fdi, we study the determinants of fdi from western countries, mainly in the european union eu, to central and eastern european ones. Our main interest is to study how different variables or indicators reflecting trade, fiscal and financial sector liberalization attract fdi in pakistan. Determinants of foreign direct investment in kenya. In the longterm, the germany foreign direct investment is. The paper empirically identifies the determinants of growth in foreign direct investment fdi in pakistan over the period 1961 to 2003. Foreign direct investment, determinants of fdi, agglomeration. The determinants of foreign direct investment in transition economies alan a. Determinants of foreign direct investment in iran seyed mohammad alavinasab, ph. Foreign direct investment fdi is an integral part of an open and effective international economic system and a major catalyst to development.
Determinants of german foreign direct investment in latin. This working paper should not be reported as representing the views of the imf. Table 3 provides a breakdown of the number of foreign affiliates that german parent firms maintain abroad by the sector of the investing firm and the foreign. Introduction with hindsight, the 1990s were the decade of initial emerging market exuberance and subsequent disillusionment. The determinants of foreign direct investment in the manufacturing industry of malaysia wong hock tsen malaysia received, over the past decades, substantial amounts of foreign direct investment fdi in its manufacturing industry which is an important engine of its economic growth. Determinants of foreign direct investment in developing countries. Working paper 6 determinants of foreign direct investment. Determinants of foreign direct investment in germany. Over the last decade foreign direct investment have grown at least twice as rapidly as trade meyer, 2003. Main determinants of foreign direct investment in the.
Barrell and pain 1997 focus on manufacturing in germany and the united kingdom and find that a 1. Foreign direct investment fdi is an important topic for developing nations as it brings with it economic development, access to managerial skills, financial resources, marketing expertise, and leads to increased employment. Fdi stocks for the uk and germany 8%14% or around 0,5% of eu gdp at. The analysis enabled identification of some economic determinants of fdi in pakistan, like gdp growth rate, volume of exports, human population, tariff on imports, and price index. The theory of foreign direct investment identifies a variety of locationspecific, strategic, financial, as well as other motives which firms have in order to become multinationals. Foreign direct investment inflow determinants have become an important topic not only for policy makers and the government but also for academic researchers and this has arisen due to the failure performance of the previous policies which have been implemented to attract more foreign direct investment in the country. This could be an important reason to attract foreign investments. Pdf foreign direct investment determinants in malaysia. The investment is made to acquire a lasting financial interest in a foreign enterprise and the investor holds interest of 10 percent or more of the equity capital. Determinants of fdi in africa lund university publications. This paper investigates the role of economic structures as determinants of fdi inflows. Foreign direct investment in germany is expected to be 14500. Foreign direct investment fdi is commonly defined as a crossboarder investment made by an enterprise directly in a production facility andor in the marketing of a product.
Strategies and determinants of foreign direct investment. Economic determinants of foreign direct investment in pakistan. Introduction since china launched the go global strategy, outward foreign direct investment ofdi from china has increased dramatically. We find evidence that determinants that are associated with horizontal fdi appear to be dominant for explaining. German firms had direct investments in developing countries totalling of 39 billion. This is despite the perceived and obvious importance of fdi in the economic growth and development of a country. Faculty of management, university of tehran, qom college, iran email. Introduction global economic integration in recent years has been on an increase, which has led to a substantial growth in the flows of foreign direct investment. The aim of this paper is to explain foreign direct investment of german. Perfect competition within the industries implies that there are numerous. By identifying the determinants of fdi in the eastern provinces of china the aim is to give implications in how to predict future fdi inflow in central and western regions.
China, outward foreign direct investment, home country determinants 1. Determinants of bank foreign direct investment inflow in. The study involved deskbased research drawing on official statistics, published economic. According to cleeve 2005, the choice of location of fdi should depend on the motivation for undertaking the investment activity. The goal of this paper is to demonstrate the relative role of countrylevel and firmlevel determinants of foreign direct investment. Introduction the significance of foreign direct investment fdi flows is well documented in literature for both the developing and developed countries. The determinants of foreign direct investment flows to. Determinants of german foreign direct investment in latin american and asian emerging markets in the 1990s 1. Determinants, foreign direct investment, ghana, ols, sector 1.
Use the free adobe acrobat reader to view this pdf file. Determinants of german foreign direct investment ftp directory. Introduction the aim of this paper is to explain foreign direct investment of german enterprises. Request pdf determinants of german foreign direct investment.
The determinants of foreign direct investment into european. Ofdi firms on average produce more output, labour and capital intensity than exporting firms. The determinants of foreign direct investment request pdf. The globalization of the world economy has created enormous opportunities as well as promotion efforts to attract foreign direct investment fdi. Determinants of foreign direct investment blonigen. Tokyo university of foreign studies determinants of foreign direct investment in india regionsectorwise analysis yuki tsuchiya 8211156 february 12, 2015 abstract. Munich personal repec archive the determinants and impacts of foreign direct investment accolley, delali 21 october 2003 online at. Journal of integrative humanism ghana march, 2014 issn. In contrast to previous empirical studies, we adopt a bayesian model averaging bma approach for a robust selection of those variables. Indeed, good institutions are supposed to exert their positive in. On the determinants of foreign direct investment to. While there are a number of empirical studies on the impact and the determinants of foreign direct investment fdi, few of the research. This type of investment occurs when a firm invests to produce a product. The determinants of foreign direct investment in the.
Bevan and saul estrin centre for new and emerging markets, london business school abstract using a panel dataset containing information on fdi flows from market to transition economies, we. Determinants of foreign direct investment 779 table 1 speci. The determinants of chinese outward foreign direct investment. Similarly, the determinants of investment vary across different business types, one that led to the export of natural resources put less emphasis on the local market scale. In this paper, the determinants of fdi towards india data from the period 200820 would be examined regionwise, using statewise data. Determinants of chinas outward foreign direct investment. Foreign direct investment provides capital for it investment, enhances job creation and managerial skills, and possibly technology transfer. We empirically analyze the determinants of inward foreign direct investment fdi in egypt employing a novel panel dataset of 26 egyptian governorates for the period 19922008. Determinants and motives of outward foreign direct. There is substantial research on the determinants of fdi across countries.
This thesis aimed to analyze the determinants of fdi in one of the most powerful economics at the world. Determinants of foreign direct investment inflows to africa, 19802007 john c. The generalized investment theory on us foreign direct investment then is tested empirically utilizing panel data for 44 countries from 1983 to 1990. Empirical studies of bilateral foreign direct investment fdi activity show substantial differences in specifications with little agreement on the set of included covariates. Paper outline in this paper i will first give the reader an introduction on foreign direct investment focusing. The results indicate that the factors that drive fdi to developing countries have a different impact on fdi to ssa.
Determinants of fdi by isomorphic pressures adopted from francis and zheng 2009 francis and zheng 2009 identified nine levels of pressure called isomorphic pressure figure 1, which may lead to the selection of foreign direct investment. Some country experiences in investment promotion in africa 24 3 investment policies, institutional framework and effects 28 investment incentives 28 the mining sector and foreign direct investment 34 the free zones scheme and fdi flows 40 privatisation and fdi 41 4 empirical specifications and estimation of the econometric approach 45. This study will examine the determinants of foreign direct investment fdi based on empirical evidence from nigeria. Using the case of arab fdi to egypt, we also investigate whether fdi location determinants are. The main aim of this study is to investigate the longrun. Foreign direct investment flows to prospering regions such as. Anyanwu is a lead research economist, development research department, african development bank j. Determinants of foreign direct investment inflow in tanzania.
Fdi nourishes recipient countries with the capital inflows, technological knowhow, human capital development and managerial expertise required for sustainable economic development. Determinants of foreign direct investment in ghana. The effort of most african countries to attract fdi has not been quite successful in recent times. Walsh and jiangyan yu july 2010 abstract this working paper should not be reported as representing the views of the imf. Pdf this study examines panel data evidence concerning. Therefore there are a growing number of studies analysing the causal relationship between fdi. The growth of foreign direct investments fdi in the world has been significant in recent years. Evidence on the determinants of foreign direct investment 97 states the concentration of fdi is stronger in capital regions than in other regions.
This study investigates the determinants of chinese outward direct investment odi and the extent to which three special explanations capital market imperfections, special ownership advantages and institutional factors need to be nested within. The determinants of foreign direct investment in the african. C52,f21,f23 abstract empirical studies of bilateral foreign direct investment fdi activity show substantial differences in specifications with little agreement on the set of covariates that are or should be included. A comparative analysis it is widely recognized that foreign direct investment fdi produces economic benefits to the recipient countries by providing capital, foreign exchange, technology and by enhancing. Determinants and motives of outward foreign direct investment. The determinants of foreign direct investment in transition.
Purpose the purpose of this paper is to examine the determinants of foreign direct investment fdi flows from some leading developed countries the usa, japan, germany, the netherlands, the uk. The estimation results provide considerable support for the importance of both traditional and nontraditional factors in determining flows of foreign direct investment in a country. The keywords foreign direct investment and africa yielded ten papers on fdi determinants to africa, which are the object of the present paper. Determinants of foreign direct investment in developing. International trade and investment empirical studies of bilateral foreign direct investment fdi activity show substantial differences in specifications with little agreement on the set of covariates that are or should be included. The views expressed in this working paper are those of the authors and do not necessarily represent. This paper examines the determinants of foreign direct investment fdi in nigeria during 1980 2011. The determinants of foreign direct investmentempirical. Which macroeconomic, regulatory and geographic factors determine the foreign direct investment decisions of german multinationals. This paper attempts to assess the determinants of foreign direct investment fdi in china and its effects on the whole economy.
Furthermore, infrastructure is an important determinant factor, but not of a conclusive significance to the investment decision. Determinants of foreign direct investment in nigeria. This paper investigates the determinants of foreign direct investment in nigeria. Most regions, notably in the southern countries of eu and at the eastern external borders, have been clearly at the margin of the location patterns of mnes in europe. The purpose of this paper is to identify key determinants of foreign direct investment fdi inflows in developing countries by using unbalanced panel data set pertaining to the years 19902012. Jan 01, 2002 foreign direct investment in southern africa. Blonigen university of oregon jeremy piger university of oregon abstract.
A sectoral and institutional approach prepared by james p. Location determinants of foreign direct investment in services lse. Empirical studies of bilateral foreign direct investment fdi activity show substantial differences in specifications with little agreement on the set of covariates that are or should be included. This paper explores whether factors that affect foreign direct investment fdi in developing countries affect countries in subsaharan africa ssa differently. Looking forward, we estimate foreign direct investment in germany to stand at 2. We use bayesian statistical techniques that allow one to select from a large set of candidates those variables most likely to be determinants of fdi activity. National policies and the international investment architecture. Determinants and effects of foreign direct investment. India received highest foreign direct investment fdi in the world during the first half of 2015, leaving bigger economies like the us and china behind. The determinants and impacts of foreign direct investment.
The research was undertaken in the period from december 2007june 2008. In section 3, we examine recent studies that analyze the relation between fdi and several economic factors. Csae, university of oxfordcrefsa, london school of. Determinants of foreign direct investment biswas 2002. Foreign direct investment is believed to make significant contributions to growth and economic development of host recipient countries. Among the noneconomic factors, there are several problems regarding the identification of relevant fdi determinants. When investigating foreign direct investment, scientists focus on different combinations of factors.
The perfect market assumes that there exists competition for investment, equal opportunity, and there is equal return on investment across the countries. Between 1990 and 2000 worldwide fdi inflows increased more than five times, and since 2000 they have declined. Determinants of foreign direct investment request pdf. Yet, the benefits of fdi do not accrue automatically and evenly across countries, sectors and local communities. Foreign direct investment is defined as the investment made by a firm or an individual or an entity based in local country, into a firm, or entity based in another country dunning, 1977.
Institutional determinants of foreign direct investment such link could be seen as one channel through which institutions promote productivity growth. Institutional determinants of foreign direct investment. A comparative analysis khondoker abdul mottaleba kaliappa kalirajanb abstract by bridging the gap between domestic savings and investment and bringing the latest technology and management knowhow from developed countries, foreign direct investment fdi can play an. We find the most important influences to be unit labor costs, gravity factors, market size, and proximity. In addition to the specified variables, the political situation in turkey was cited as an. China works on to advance the agenda of the bri both at home and abroad. Its heady growth has attracted a huge amount of private equity investments from both domestic and foreign investors. In the process of globalization, india has liberalized all its sectors and invited fdi in most of the sectors, albeit with a sectoral cap. Determinants of foreign direct investment in nigeria 1980. Determinant of foreign direct investment in indias ecommerce sector dr rahul choudhury1 the ecommerce sector in india has experienced remarkable growth in recent years with many new players entering the market. During the period of fdi expansion, growth was especially strong from 1997 onward.
Purpose the purpose of this paper is to examine the determinants of foreign direct investment fdi flows from some leading developed countries the usa, japan, germany, the netherlands, the uk and france into major four asian economies china, korea, india and singapore. Strategies and determinants of foreign direct investment fdi. They often emphasize the economic ones, while underestimating the others. The determinants of foreign direct investment do statutory restrictions matter. Foreign direct investment plays an important role in boosting up a countrys economic growth and its development. It is clear that on average the ofdi firms are bigger than the exporting firms.
However, the procedure used to test causality showed, to the contrary, that this phenomenon acts in the opposite sense, i. Empirical studies of bilateral foreign direct investment fdi activity show substantial differences in speci. In addition to the aforementioned approaches, in a survey of theories of international production, cantwell 1991 has also identified another two, namely. The goal of this study is to detect and analyze management strategy to attract foreign direct investment. The determinants of foreign direct investment oecd working papers on international investment selected studies on international investment and investment policy prepared for use within the oecd. This paper has analyzed the determinants of foreign direct investment fdi to developing countries and examined why subsaharan africa ssa has been relatively unsuccessful in attracting fdi despite policy reform. Openness of a country is generally measured as the proportion of. Evidence on the determinants of foreign direct investment. This study considers 20 developing countries from the whole of south, east and southeast asia. Volume of exports has been emerged the most powerful determinant of fdi. Germany foreign direct investment 19712020 data 2021. Shaver 1998 identified several elements which impact the choice of us foreign direct investment location.
Strategies and determinants of foreign direct investment fdi attraction abstract. The role of foreign direct investment in the development of nigerian economy cannot be over emphasized. Foreign direct investment is one of the economic concepts that are seen as the determinants of econo mic development of the countrie s in the context of the market economy. Foreign direct investment fdi is known as a kind of investment that includes the insertions of oversea funding to a project that runs in another country from th e investors side. This paper provides new evidence on the drivers of german outward foreign direct investment fdi stocks for the period 19962012. After presenting the main theoretical contributions and the previous works done about chinas inwardfdi, an empirical study has been implemented extending the previous ones with a different data set more recent and with different methodologies. The findings indicate that exchange rate economic factor and political instability are the crucial determinants of fdi in nigeria. The research investigates the determinants of foreign direct investment fdi in nigeria over the period for 19802007. It aimed at determining functional relationships that exist between gdp, wage rate, interest rate and relative openness index, and the extent to which each variable. Determinants and growth effects of foreign direct investment. Determinants and motives of outward foreign direct investment from chinas provincial firms chunlai chen based on dunnings oli framework and the investment development path theory, this paper investigated the determinants of outward fdi by chinas provincial firms. Discussed are early studies of determinants of fdi 1 as well as determinants of fdi based on the neoclassical trade theory 2, ownership.
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