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How investment promotion affects attracting foreign direct investment: Analytical argument and empirical analyses

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  • Lim, Sung-Hoon
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    Abstract

    This paper examines that how a host government's promotional effort, through the establishment of investment promotion agency (IPA), can influence foreign direct investment (FDI) inflows. This paper conducts structural equation analyses with maximum-likelihood estimations focusing upon the effectiveness of investment promotion as a mediator between the host country's FDI environment and FDI inflows. The empirical results show that the effectiveness of investment promotion, measured by IPA age, IPA's overseas staff intensity, and number of IPA staff, positively affects the attraction of FDI. From the results, we infer that enhancing investment promotion can be a tool for attracting FDI through the mediation effect that coordinates other determinants of FDI such as market size, market growth, and low labor costs.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 17 (2008)
    Issue (Month): 1 (February)
    Pages: 39-53

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    Handle: RePEc:eee:iburev:v:17:y:2008:i:1:p:39-53

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    Related research

    Keywords: Investment promotion agency Foreign direct investment inflows FDI determinants Mediation effect Structural equation model;

    References

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    Cited by:
    1. Kemp-Benedict, Eric, 2012. "The national bioenergy investment model: Technical documentation," MPRA Paper 37835, University Library of Munich, Germany.

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