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How do economic complexity and productive capacities foster foreign direct investment flows? Evidence from the Asian economies

Author

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  • Nathapornpan Uttama

    (Economics Program, School of Management, Mae Fah Luang University)

  • Popkarn Arwatchanakarn

    (Mae Fah Luang University)

Abstract

This study focuses on a critical question for Asian economies whether economic complexity and productive capacities influence foreign direct investment (FDI) flows. The analysis is carried out for FDI flows in 17 Asian countries from 1995 to 2020. A penalized Poisson pseudo-maximum likelihood regression with an adaptive lasso for consistent variable selection is utilized in the estimation. The major findings reveal that economic complexity has a negative influence on FDI flows, while productive capacity has a positive impact on FDI flows, particularly inward FDI. Most Asian economies are more likely to encourage foreign direct investment (investing countries) and to market themselves as foreign direct investment hubs (recipient countries) . Consequently, policymakers should encourage the transformation of economic complexity, the strengthening of productive capacity, and sustainable investment. productive capacities influence foreign direct investment (FDI) flows. The analysis is carried out for FDI flows in 17 Asian countries from 1995 to 2020. A penalized Poisson pseudo-maximum likelihood regression with an adaptive lasso for consistent variable selection is utilized in the estimation. The major findings reveal that economic complexity has a negative influence on FDI flows, while productive capacity has a positive impact on FDI flows, particularly inward FDI. Most Asian economies are more likely to encourage foreign direct investment (investing countries) and to market themselves as foreign direct investment hubs (recipient countries) . Consequently, policymakers should encourage the transformation of economic complexity, the strengthening of productive capacity, and sustainable investment.

Suggested Citation

  • Nathapornpan Uttama & Popkarn Arwatchanakarn, 2023. "How do economic complexity and productive capacities foster foreign direct investment flows? Evidence from the Asian economies," Economics Bulletin, AccessEcon, vol. 43(1), pages 629-643.
    • Handle: RePEc:ebl:ecbull:eb-22-00003
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    More about this item

    Keywords

    Economic complexity; Productive capacities; Foreign direct investment;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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