An Empirical Study on the Internal Infra-wise Determinants of FDI Activity

June 30, 2023  |  Vol.9, No.6  |  PP. 91-101  | PDF

AUTHORS:

Hyung Rok Yim, School of Business, Hanyang University, Korea

KEYWORDS:

FDI, Resource Allocaiton, Social Infrastructure, Resource Linkage, Determinants

Abstract

It is casually known that FDI becomes to pursue capital market efficiency throughout resource allocation transferred from developed countries to less developed countries. Simply speaking, not only capital but also technologies along to know-hows can be transfeered through FDI. Differently from the traditional view of resource allocation, this paper adopts the view of resource linkage for identifying FDI determinants. For this purpose, a theoretic mechanism, based on a concave utlity fuction, is attempted to demonstrate that inward FDIs, when linked with a local country’s social infrastructure, are able to increase the total welfare of local countries. Some empirical works done with 144 countries reveal that the larger the economy size is, the larger the capital scale of FDI would be, and the higher the corruption level of a local country is, the smaller FDI invesmtnent scale would be. Those social infrastructures like ‘enforcing contracts’ and ‘resolving insolvency’ have positive effects on FDI investments. Acknolwdging that the degree of socal infrastructures can be different across national borders due to the different economic development stage of individual countries, a regional empirical work classifying OECD region from non-OECD region is done. It is an eye-catching finding that the former can invite large FDIs as lower the degree of the country’s corruption level while the latter shows an exactly oppositive direction. Further, enforcing-contracts significantly affects those FDIs heading to non-OECD region only, which implicates that a group of developed countries owning relatively refined social infrastructures are more likely to enjoy larger scale FDIs.

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Citations:

APA:
Yim, H. R. (2023). An Empirical Study on the Internal Infra-wise Determinants of FDI Activity. Asia-pacific Journal of Convergent Research Interchange (APJCRI), ISSN: 2508-9080 (Print); 2671-5325 (Online), KCTRS, 9(6), 91-101. doi: 10.47116/apjcri.2023.06.08.

MLA:
Yim, Hyung Rok, “An Empirical Study on the Internal Infra-wise Determinants of FDI Activity.” Asia-pacific Journal of Convergent Research Interchange, ISSN: 2508-9080 (Print); 2671-5325 (Online), KCTRS, vol. 9, no. 6, 2023, pp. 91-101. APJCRI, http://apjcriweb.org/content/vol9no6/8.html.

IEEE:
[1] H. R. Yim, “An Empirical Study on the Internal Infra-wise Determinants of FDI Activity.” Asia-pacific Journal of Convergent Research Interchange (APJCRI), ISSN: 2508-9080 (Print); 2671-5325 (Online), KCTRS, vol. 9, no. 6, pp. 91-101, June 2023.