Labour Market Regulations and FDI Inflows in Developing Countries   An Empirical Analysis

Negi, Vipin; Bardhan, Amit Kumar

doi:10.2139/ssrn.3188177

Cited by 4 publications

(8 citation statements)

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“…The pattern certainly holds true for wealthier economies, all but one of the studies confined to these nations detecting a negative impact (Bellak and Leibrecht, 2011;B enassy-Qu er e et al, 2007;Cooke, 1997Cooke, , 2001Delbecque et al, 2014;Dewit et al, 2009;Gross and Ryan, 2008;Ham and Kleiner, 2007;Kandilov and Sense, 2016;Olney, 2013). Yet, things are far less orderly for emerging markets, where one finds reports of negative (Blanton and Blanton, 2012a;Negi and Bardhan, 2017;Payton and Woo, 2014), positive (Blanton and Blanton, 2012b;Busse et al, 2011;Wood et al, 2016), and no effects (Dibben et al, 2011;Leibrecht and Scharler, 2009). Similar discord is evident when the sample was mixed (cf.…”

Section: Literature Reviewmentioning

confidence: 88%

“…, 2009; Gross and Ryan, 2008; Ham and Kleiner, 2007; Kandilov and Sense, 2016; Olney, 2013). Yet, things are far less orderly for emerging markets, where one finds reports of negative (Blanton and Blanton, 2012a; Negi and Bardhan, 2017; Payton and Woo, 2014), positive (Blanton and Blanton, 2012b; Busse et al. , 2011; Wood et al ., 2016), and no effects (Dibben et al.…”

Section: Literature Reviewmentioning

confidence: 99%

“…, 2014; Dewit et al. , 2009; Gross and Ryan, 2008; Javorcik and Spatareanu, 2005; Kandilov and Sense, 2016; Krzywdzinski, 2014; Negi and Bardhan, 2017; Olney, 2013). Collective protections (i.e., freedom of association and collective bargaining) are far less researched with very disjointed results.…”

Section: Literature Reviewmentioning

confidence: 99%

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Foreign investment sensitivity to employment regulation: reassessing what really matters

Florkowski

2023

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PurposeDrawing on the international business and IHRM literature, this study investigated the effects that employment regulation and its nature of enforcement have on foreign investment in emerging markets.Design/methodology/approachPanel regressions with time fixed effects were conducted for the period 2002–2017 using regulatory, human capital, and economic data for 34 developing nations. Robustness checks also were performed by varying the measures for key predictors along with the modes of analysis (i.e., Pooled OLS with clustered standard errors, generalized estimating equations (GEE), and instrumental variable (IV) regression with the generalized method of moments (GMM) approach).FindingsAlthough the totality of restrictions did not have an impact, FDI inflows were negatively related to the process strength of enforcement. This suggests investors place greater emphasis on de facto exposure than on de jure enactments, favoring nations less willing or able to push for compliance. In addition, while GDP growth had a positive impact on inward investment, the opposite was found for licensing restrictions and labor productivity. The remaining controls failed to display consistent relationships with foreign investment.Research limitations/implicationsData constraints precluded the inclusion of additional economies and years before 2001. It also was not possible to directly evaluate the influence of labor costs without a standardized measure for developing nations. This entered at best indirectly in GDP per capita, which was tested.Practical implicationsThese findings have important implications for social responsibility, suggesting more aggressive monitoring is needed of investment criteria and government relations. At a minimum, social auditing and reporting should better document overt commitments to rights-adherence and compliance-partnering. CSR stakeholders can work in tandem, tracking enforcement more closely and lobbying governments to discourage policies of lax enforcement.Originality/valueThis is the first study to assess how legal stock and its manner of enforcement influence FDI inflows. Improving on earlier studies, employment law was measured with a broad legal scale that was annually adjusted. Enforcement was evaluated in two different forms, both as process strength and administrative capacity – the former drawing investors' attention.

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Section: Literature Reviewmentioning

confidence: 88%

Section: Literature Reviewmentioning

confidence: 99%

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Foreign investment sensitivity to employment regulation: reassessing what really matters

Florkowski

2023

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“…As a result, it appears necessary to look beyond labour costs to analyse corporations' international relocation strategies. Yet, it is true that there is also a relative consensus that this factor does play some role in attracting MNCs' investments, especially so in developing countries (Athukorala and Kohpaiboon 2015: 17;Mucchielli and Mayer 2004: 46;Negi and Bardhan 2018). To sort out these hypotheses in the context of our case study, it is necessary to put Malaysia in its regional context.…”

Section: Is Capital 'Chasing Labour' In Malaysia?mentioning

confidence: 99%

“…Later on, as industrial real estate and labour costs rose in the citystate, foreign capital started to spill over to neighbouring countries, with investors looking for cheaper production factors (Athukorala and Kohpaiboon 2015). In this regional setting, MNCs' investments have been mainly of the 'efficiency seeking' type (Dunning and Lundan 2008: 34;Negi et Bardhan 2018;Storper 2000: 135); indeed, the regional organization of manufacturing has supported the emergence of what economists term 'vertical integration', meaning the fragmentation and coordination of production and assembly processes between different production units, and in this case across several countries. This distribution aims at leveraging specific, location-based resources (such as wage levels, productivity, infrastructures, geographic location, cultural and linguistic assets, literacy rates, access to capital, legal system, etc.)…”

Section: Is Capital 'Chasing Labour' In Malaysia?mentioning

confidence: 99%

Incorporating transnational labour: Migration rent, combined relocation, and offshore production networks in Malaysia

Bastide

2019

Migration Studies

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The article explores the interactions between transnational labour migration, multinational corporations’ (MNCs) location strategies, and public policies in the context of contemporary Malaysia. My main hypothesis is that the country’s position in global production networks is dependent on the presence of a large pool of foreign workers. To demonstrate this relationship, I develop the concept of ‘migration rent’ in order to account for the specific characteristics of migrant labour in Malaysia. By showing that this rent allows the optimisation of labour, as a production factor, beyond the sole issue of labour costs, the concept allows an explanation for why foreign direct investment does not move to lower-wage countries. By allowing and organising the recruitment of foreign workers on a large scale, the government has shaped territories where both capital and labour can be relocated to achieve effective production factor combinations. To understand this process, I articulate the concept of ‘combined relocation’, which describes transnational investment strategies where both capital and labour are moved to a third country—here Malaysia—under the former’s command. In so doing, the paper thus adds to the literature on MNCs’ spatial strategies, on transnational labour migration, and on Malaysia’s political economy.

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Legal environment as a factor in the inflow of Foreign Direct Investment: Case of Serbia

Marjanović,

Domazet,

Vukmirović

2024

JEECAR

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The economic growth and development of a country depend on the inflow of foreign direct investment, and the legal environment factors play an important role in securing it. Compared to other countries in South-Eastern Europe, Serbia has achieved remarkable results in terms of FDI inflows over the last ten years. The research examines the impact of the legal environment on FDI inflows in Serbia. The study was conducted using a quantitative approach and a survey technique based on a structured questionnaire. The basic set of the research consists of the 300 most prominent foreign investors (response rate of 28%) who invested capital in Serbia in the period 2011-2019. The results of the conducted research show that ownership in Serbian companies is the most important factor in the legal environment that influences a foreign investor's decision to invest capital in these companies. The results show that labor legislation, law enforcement, and confidence in the legal system can significantly contribute to a foreign investor's decision to invest capital in Serbia. The legal environment's implications influence investor decisions and shape the overall investment climate of a country. A well-structured and investor-friendly legal framework will increase Serbia's competitiveness and attractiveness for foreign investments.

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Labour Market Regulations and FDI Inflows in Developing Countries An Empirical Analysis

Cited by 4 publications

References 41 publications

Foreign investment sensitivity to employment regulation: reassessing what really matters

Foreign investment sensitivity to employment regulation: reassessing what really matters

Incorporating transnational labour: Migration rent, combined relocation, and offshore production networks in Malaysia

Legal environment as a factor in the inflow of Foreign Direct Investment: Case of Serbia

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