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

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  • Lim, Sung-Hoon

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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  • Lim, Sung-Hoon, 2008. "How investment promotion affects attracting foreign direct investment: Analytical argument and empirical analyses," International Business Review, Elsevier, vol. 17(1), pages 39-53, February.
    • Handle: RePEc:eee:iburev:v:17:y:2008:i:1:p:39-53
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    4. Magdalena Owczarczuk, 2013. "Government Incentives and FDI inflow into R&D – The Case of Visegrad Countries," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 1(2), pages 73-86.
    5. Paulo Elicha Tembe & Kangning Xu, 2012. "Attracting Foreign Direct Investment in Developing Countries: Determinants and Policies-A Comparative Study between Mozambique and China," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 3(4), pages 69-81, October.
    6. Romualdas Ginevičius & Agnė Šimelytė, 2011. "Government incentives directed towards foreign direct investment: a case of central and eastern europe," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 12(3), pages 435-450, May.
    7. Manpreet Kaur & Surendra S. Yadav & Vinayshil Gautam, 2013. "Financial System Development and Foreign Direct Investment: A Panel Data Study for BRIC Countries," Global Business Review, International Management Institute, vol. 14(4), pages 729-742, December.
    8. Nicolas Papadopoulos & Yara Ibrahim & Alessandro De Nisco & Maria Rosaria Napolitano, 2018. "The Role of Country Branding in Attracting Foreign Investment: Country Characteristics and Country Image," MERCATI & COMPETITIVIT?, FrancoAngeli Editore, vol. 2018(2), pages 85-108.
    9. K. I. Grasmik & A. A. Nesterov, 2016. "Corporation for development as a tool to attract foreign investment," Studies on Russian Economic Development, Springer, vol. 27(3), pages 262-268, May.
    10. Knoerich, Jan & Vitting, Simon, 2021. "The distinct contribution of investment promotion agencies’ branch offices in bringing Chinese multinationals to Europe," Journal of World Business, Elsevier, vol. 56(3).
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