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Debunking the Myth of Foreign Direct Investment toward Long-Term Sustainability of a Developing Country: A Transaction Cost Analysis Approach

Author

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  • Hoang Viet Nguyen

    (Department of Research Administration, Thuongmai University, Hanoi 100000, Vietnam)

  • Thanh Tu Phan

    (Research Department, HKT Consultant, Hanoi 100000, Vietnam
    Faculty of Economics and Management, Hai Duong University, Hai Duong City 170000, Vietnam)

  • Antonio Lobo

    (Department of Management and Marketing, Faculty of Business and Law, Swinburne University of Technology, Hawthorn, Victoria 3122, Australia)

Abstract

This study focuses on the relationship between foreign direct investment (FDI) and sustainability in a developing host country, i.e., Vietnam, using the transaction cost approach. Secondary panel data were obtained from 62 provinces in Vietnam for the period between the years of 2010 and 2016. The analysis of the data was performed using the fixed effects regression model, which yielded interesting and controversial findings. Essentially, it was demonstrated that the FDI made by enterprises and the subsequent employment that it generated had several positive and significant influences on the long-term sustainability of provinces in Vietnam. However, the downside was that the value of fixed assets and long-term investment of FDI projects in conjunction with the size of the provinces negatively influenced their long-term sustainability. The findings of this study have important academic and practical implications. We propose some policy changes that would considerably improve the efficacy and effectiveness of FDI. This, in turn, will certainly enhance the long-term sustainability of host countries, especially developing ones.

Suggested Citation

  • Hoang Viet Nguyen & Thanh Tu Phan & Antonio Lobo, 2019. "Debunking the Myth of Foreign Direct Investment toward Long-Term Sustainability of a Developing Country: A Transaction Cost Analysis Approach," Sustainability, MDPI, vol. 11(17), pages 1-26, August.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:17:p:4569-:d:260119
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    2. Nguyet Nguyen & Ha Thi Hoang Tran & Tuan Duong Vu, 2022. "Country Distance and Entry Mode Choice of MNEs in Vietnam’s Agricultural Sector in Context of Free Trade," Sustainability, MDPI, vol. 14(6), pages 1-16, March.

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