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The Causal Relationship Between Information and Communication Technology and Foreign Direct Investment

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  • Roghieh Gholami
  • Sang-Yong Tom Lee
  • Almas Heshmati

Abstract

This paper investigates the simultaneous causal relationship between investments in information and communication technology (ICT) and flows of foreign direct investment (FDI), with reference to its implications on economic growth. For the empirical analysis we use data from 23 major countries with heterogeneous economic development for the period 1976-99. Our causality test results suggest that there is a causal relationship from ICT to FDI in developed countries, which means that a higher level of ICT investment leads to an increase inflow of FDI. ICT may contribute to economic growth indirectly by attracting more FDI. Contrarily, we could not find significant causality from ICT to FDI in developing countries. Instead, we have partial evidence of opposite causality relationship: the inflow of FDI causes further increases in ICT investment and production capacity. Copyright United Nations University 2006.

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  • Roghieh Gholami & Sang-Yong Tom Lee & Almas Heshmati, 2006. "The Causal Relationship Between Information and Communication Technology and Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 29(1), pages 43-62, January.
  • Handle: RePEc:bla:worlde:v:29:y:2006:i:1:p:43-62
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    References listed on IDEAS

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    Cited by:

    1. Heshmati, Almas & Davis, Rhona, 2007. "The Determinants of Foreign Direct Investment Flows to the Federal Region of Kurdistan," IZA Discussion Papers 3218, Institute for the Study of Labor (IZA).
    2. Toure Mamoudou & Cédric Achille Mbeng Mezui, 2017. "Working Paper 271 - Facteurs déterminants des IDE en Afrique," Working Paper Series 2388, African Development Bank.
    3. Costantini, Valeria & Liberati, Paolo, 2014. "Technology transfer, institutions and development," Technological Forecasting and Social Change, Elsevier, vol. 88(C), pages 26-48.
    4. repec:spr:soinre:v:133:y:2017:i:3:d:10.1007_s11205-016-1402-6 is not listed on IDEAS
    5. Costantini, Valeria & Crespi, Francesco, 2008. "Environmental regulation and the export dynamics of energy technologies," Ecological Economics, Elsevier, vol. 66(2-3), pages 447-460, June.
    6. John Anyanwu, 2011. "Working Paper 136 - Determinants of Foreign Direct Investment Inflows to Africa, 1980-2007," Working Paper Series 327, African Development Bank.
    7. Chan, M.W. Luke & Hou, Keqiang & Li, Xing & Mountain, Dean C., 2014. "Foreign direct investment and its determinants: A regional panel causality analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 579-589.
    8. Yapatake Kossele Thales Pacific, 2015. "Foreign Direct Investment in Anglophone and Francophone African Countries," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(12), pages 39-57, December.
    9. Heshmati, Almas, 2007. "A Model for Industrial Development of the Federal Region of Kurdistan: Science and Technology Policy, Instruments and Institutions," IZA Discussion Papers 3213, Institute for the Study of Labor (IZA).
    10. Berghäll, Elina, 2008. "Revealing Agglomeration Economies with Stochastic Frontier Modelling in the Finnish ICT Industry," Discussion Papers 435, VATT Institute for Economic Research.
    11. Sophia P. Dimelis & Sotiris K. Papaioannou, 2011. "Technical Efficiency and the Role of ICT: A Comparison of Developed and Developing Countries," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 47(0), pages 40-53, July.
    12. repec:ssi:jouesi:v:1:y:2014:i:4:p:230-238 is not listed on IDEAS
    13. John C. Anyanwu, 2012. "Why Does Foreign Direct Investment Go Where It Goes?: New Evidence From African Countries," Annals of Economics and Finance, Society for AEF, vol. 13(2), pages 425-462, November.
    14. Ira Haavisto & Alain Vaillancourt, 2017. "The Effect of ICT on Supply Chains of Emerging Markets," CIRANO Working Papers 2017s-28, CIRANO.
    15. Yapatake Kossele Thales Pacific, 2015. "Foreign Direct Investment in Anglophone and Francophone African Countries," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(11), pages 337-350, November.
    16. Heshmati, Almas, 2004. "Growth, Inequality and Poverty Relationships," IZA Discussion Papers 1338, Institute for the Study of Labor (IZA).
    17. Aneta Kosztowniak, 2014. "Analysis Of The Cobb-Douglas Production Function As A Tool To Investigate The Impact Of Fdi Net Inflows On Gross Domestic Product Value In Poland In The Period 1994–2012," Oeconomia Copernicana, Institute of Economic Research, vol. 5(4), pages 169-190, December.
    18. Heshmati, Almas, 2007. "Establishment of Science Parks in the Federal Region of Kurdistan," IZA Discussion Papers 3252, Institute for the Study of Labor (IZA).
    19. Hung, Chih-Young & Chiang, Yi-Hui, 2009. "Does an upper limit on foreign direct investment matter?: The case of Taiwan," Journal of Asian Economics, Elsevier, vol. 20(5), pages 549-560, September.

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