Determinants of Foreign Direct Investment: A Systematic Review of the Empirical Studies

Purpose This study aims to enhance the current framework for decision-making regarding foreign direct investment (FDI) in developing countries, with consideration of the trend toward decentralized power. Design/methodology/approach The study uses static and dynamic panel data regression covering a period of 13 years (2010–2022) related to regencies and municipalities. The period includes the evolution of all 18 Indonesian Special Economic Zones (SEZs). This study integrates regional competitiveness factors such as local government capital expenditure, democratic, social welfare and economic fundamentals. Findings This paper argues that the level of government involvement should be decided according to the phase of SEZ development, the type of policy being implemented (countercyclical or procyclical), and the complexity of the FDI policy. These factors will determine the degree of interference, whether extensive or modest. Research limitations/implications The paper analyses the application of New Keynesian and public expenditure theory to address the complex variables involved in local-level FDI decisions, which have been insufficiently studied in emerging countries. Originality/value The paper does not include a comprehensive explanation of the complex processes that lead to improvements in wages.

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Does hosting FIFA World Cup attract inward FDI? An empirical investigation using sectoral panel data of 12 countries

Ait Soussane,

Ibourk

2024

IJEFM

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PurposeThe primary objective is to analyze the direct and short-run impact of hosting the FIFA World Cup on inward FDI, considering both aggregate and sectoral levels. Additionally, the study aims to investigate the moderating role of governance quality on this impact, emphasizing the importance of robust institutional frameworks in attracting FDI.Design/methodology/approachThis paper uses panel data spanning 1970–2022, encompassing 12 countries that have hosted FIFA World Cup events. The study employs a linear regression model with a robust weighted least squares (RWLS) estimation method. It incorporates various control variables and the institutional quality as moderating variables, to evaluate the impact of hosting the FIFA World Cup on inward FDI at both aggregate and sectoral levels.FindingsHosting the FIFA World Cup is associated with a significant average increase of $4.33 bn in inward FDI at the aggregate level. Notably, governance quality serves as a critical moderating factor, with well-governed countries experiencing a more substantial increase in FDI, totaling $10.5 bn. At the sectoral level, the results reveal that poorly governed countries attract FDI in primary sectors, while well-governed countries attract FDI in secondary and tertiary sectors. This highlights the nuanced dynamics of FDI attraction depending on the institutional quality of the host countries.Research limitations/implicationsA primary limitation lies in the scarcity of sectoral-level data, constraining the comprehensive study of the relationship between hosting mega-sport events and FDI. Future research could explore alternative data sources and methodologies to overcome this limitation. Additionally, extending the analysis to include other economic indicators beyond FDI could provide a more holistic understanding of the economic implications of hosting major international sporting events.Originality/valueThis study contributes to the literature by focusing exclusively on the FIFA World Cup and undertaking a comprehensive sectoral analysis. By incorporating governance quality as a moderating variable, it adds a nuanced layer to the understanding of the impact of hosting international events on FDI at the sectoral level. The findings underscore the importance of targeted strategies and robust institutional quality in enhancing FDI attractiveness.

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Determinants of Foreign Direct Investment: A Systematic Review of the Empirical Studies

Cited by 9 publications

References 117 publications

Economic, social and institutional determinants of FDI inflows: A comparative analysis of developed and developing economies

Economic, social and institutional determinants of FDI inflows: A comparative analysis of developed and developing economies

Imperfect market competition theory on foreign direct investment using regency-level data: evidence from Indonesian special economic zones

Does hosting FIFA World Cup attract inward FDI? An empirical investigation using sectoral panel data of 12 countries

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