THE DETERMINANTS OF FOREIGN DIRECT INVESTMENT (FDI): HOW IMPORTANT ARE INSTITUTIONAL FACTORS IN DEVELOPING COUNTRIES?
Since the 1980s, the attractiveness of foreign direct investment has always been one of the growth drivers for most developing countries. Indeed, the debt crises that have shaken these countries have led them to change at least partially their development strategies. Different empirical studies have tried to deal with such an issue. In this paper, we examine empirically the determinants of foreign direct investment (FDI). We employ a sample that covers a panel of 46 developing countries over the period of study from 1996 to 2018. These countries are grouped in four regions such as: Africa Sub-Saharan (12), Middle East and North Africa (6), Latin America Caribbean (20), Asia and Pacific (8). From the empirical results, we show that, in addition to some classic determinants of foreign direct investment attractiveness, institutional factors, particularly those related to economic freedoms, available to investors, are also of great importance. In terms of economic policy implications in our study, developing countries, especially Middle East and North Africa countries, must act on the level of freedoms to progress their incorporation into the global economic system but moreover to address the main contest, refining the standard of living of the population, which remains depreciated in the massive popular of countries. This obviously means creating a satisfactory business climate that can inspire together domestic and foreign investors and therefore generate a dynamics, capable of removing the challenges of development and integration.
Goel, S., Kumar, P., Rao, K. S. (2012). Trends and Patterns of FDI in India and its economic growth. Asian Journal of Research in Business Economics and Management, 2 (4), 130–144.
Vyas, A. V. (2015). An analytical study of FDI in India. International Journal of Scientific and Research Publications, 5 (10), 1–30.
Nair, S. B., Minimol, M. C. (2015). FDI in Retail and its Impact on Indian EconomyAn Analytical Study. International Journal of Science and Research, 6 (5), 929–932.
Kumar, V. (2019). Trend of FDI in India and Its Impact on Economic Growth. International Journal of Science and Research, 3 (10), 639–642.
Ndugbu, M. O., Duruechi, A. H., Ojegbe, J. S. (2017). Macroeconomic policy variables and foreign direct investment in Nigeria. IIARD International Journal of Banking and Finance Research, 3 (2), 112–136.
Mohammed, M. W., Samwel, N. M. (2015). Analysis of the determinants of foreign direct investment in Kenya. Journal of Multidisciplinary Scientific Research, 3 (4), 16–26.
Kalu, E. U., Nkor, N. N., Obasikene, A. C., Nwonye, N. (2016). Responsiveness of foreign direct investment to trade openness in Nigeria. Research journali’s Journal of Economics, 4 (5), 1–11.
Sufian, E. M., Moise, G. (2010). Another look at the determinants of foreign direct investment in MENA countries: an empirical investigation. Journal of Economic Development, 35 (2), 75–95. doi: http://doi.org/10.35866/caujed.2010.35.2.005
Demirhan, E., Masca, M. (2008). Determinants of foreign direct investment flows to developing countries: a cross-sectional analysis. Prague Economic Papers, 17 (4), 356–369. doi: http://doi.org/10.18267/j.pep.337
Moosa, I. (2002), Foreign direct investment: Theory evidence and practice. Palgrave Publishers Ltd. doi: http://doi.org/10.1057/9781403907493
Dunning, J. H. (1981). Explaining the international direct investment position of countries: Towards a dynamic or developmental approach. Weltwirtschaftliches Archiv, 117 (1), 30–64. doi: http://doi.org/10.1007/bf02696577
Copyright (c) 2020 Abdelkader Derbali, Lamia Jamel
This work is licensed under a Creative Commons Attribution 4.0 International License.