IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0334043.html

Investment attractiveness in BRICS+ economies: Evaluating business environment reforms, institutional quality, and macroeconomic factors

Author

Listed:
  • Mark Awe Tachega
  • Junjian Wang
  • Yanjiao Chen
  • Rizwan Ahmed
  • Erica Odwira Opoku
  • Clement Mintah
  • Leonora Bart-Plange

Abstract

Investment is a key driver of economic growth in emerging markets, yet the factors that enable or hinder foreign direct investment (FDI) and domestic investment (DI) remain contested. Regulatory reforms aimed at improving the ease of doing business (EDB) have been widely promoted as a means to attract capital, but empirical evidence on their effectiveness, especially in diverse and institutionally heterogeneous economies, is mixed. This study examines how EDB affects investment flows in nine BRICS+ economies (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates) over 2004–2020. Three objectives guide the analysis: assessing the direct EDB-investment link, testing the mediating role of institutional quality, specifically, regulatory quality, government effectiveness, and control of corruption, and analyzing moderation by financial development, economic freedom, and macroeconomic stability. A Pooled Mean Group, Autoregressive Distributed Lag (PMG-ARDL) approach is employed for the panel estimations, complemented by Structural Equation Modelling (SEM) to quantify mediation effects. The results reveal a dual effect of EDB, as it stimulates DI but exerts a modest negative long-term impact on FDI, likely due to transitional adjustment costs and the withdrawal of targeted investment incentives. Mediation analysis shows that institutional quality strongly channels the benefits of EDB to both FDI and DI, with indirect effects often exceeding direct ones. Financial development strengthens the positive EDB-investment relationship, while economic freedom and inflation partially dampen it. Country-specific results indicate substantial heterogeneity in the EDB-investment nexus, with some economies experiencing counterintuitive or insignificant effects. Policy implications differ by investment type. For FDI, reforms should be sequenced gradually, supported by transitional incentives, and aligned with targeted institutional strengthening to offset short-term deterrents. For DI, priority should be given to reducing operational costs, expanding access to finance, and maintaining macroeconomic stability, which collectively enhance domestic firms’ capacity to invest and grow.

Suggested Citation

  • Mark Awe Tachega & Junjian Wang & Yanjiao Chen & Rizwan Ahmed & Erica Odwira Opoku & Clement Mintah & Leonora Bart-Plange, 2025. "Investment attractiveness in BRICS+ economies: Evaluating business environment reforms, institutional quality, and macroeconomic factors," PLOS ONE, Public Library of Science, vol. 20(10), pages 1-33, October.
    • Handle: RePEc:plo:pone00:0334043
    DOI: 10.1371/journal.pone.0334043
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0334043
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0334043&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0334043?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Bénétrix, Agustin & Pallan, Hayley & Panizza, Ugo, 2022. "The Elusive Link Between FDI and Economic Growth," CEPR Discussion Papers 17692, Centre for Economic Policy Research.
    2. Mamingi, Nlandu & Martin, Kareem, 2018. "Foreign direct investment and growth in developing countries: evidence from the countries of the Organisation of Eastern Caribbean States," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    3. Josephine Ofosu-Mensah Ababio & Anthony Q.Q. Aboagye & Charles Barnor & Samuel Kwaku Agyei, 2022. "Foreign and domestic private investment in developing and emerging economies: A review of literature," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2132646-213, December.
    4. Bashir Ahmad Joo & Sana Shawl, 2023. "Understanding the Relationship Between Foreign Direct Investment and Economic Growth in BRICS: Panel ARDL Approach," Vikalpa: The Journal for Decision Makers, , vol. 48(2), pages 100-113, June.
    5. Nguyen Anh Tu, 2024. "Innovation and foreign direct investment attraction in developing countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 12(1), pages 2312386-231, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sergio Mariotti & Sergio Meacci, 2026. "Africa in the global economy: development challenges and investment opportunities for Europe," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 53(1), pages 115-141, March.
    2. Magdalena Olczyk & Marjan Petreski, 2024. "From Global Value Chains to Local Jobs: Exploring FDI-induced Job Creation in EU-27," Papers 2410.04160, arXiv.org.
    3. Chimere O. Iheonu & Ekene ThankGod Emeka & Simplice A. Asongu & Princewill U. Okwoche, 2022. "Foreign Investment, International Trade and Environmental Sustainability: Exploring Ecological Footprints in 37 African Countries," Working Papers 22/068, European Xtramile Centre of African Studies (EXCAS).
    4. Ofori, Isaac K & Gbolonyo, Emmanuel Y. & Ojong, Nathanael, 2022. "Foreign Direct Investment and Inclusive Green Growth in Africa: Energy Efficiency Contingencies and Thresholds," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 1-58.
    5. Iorngurum, Tersoo, 2022. "Foreign Direct Investment, Growth, and Publication Bias in Latin America and the Caribbean," MPRA Paper 112084, University Library of Munich, Germany.
    6. Ofori, Isaac K. & Gbolonyo, Emmanuel Y. & Ojong, Nathanael, 2022. "Foreign Direct Investment and Inclusive Green Growth in Africa: Energy Efficiency Contingencies and Thresholds," MPRA Paper 115379, University Library of Munich, Germany, revised 09 Nov 2022.
    7. Isaac K. Arthur & Robert Lawrence Afutu‐Kotey & Irene Appeaning Addo, 2026. "SECURITY ZONES AS ‘NEW CITIES’: Public‐private Partnership and the Transformation of Land Use in Accra, Ghana," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 50(4), pages 921-938, July.
    8. Amina Derbal & Abdelmalek Lakhdar & Youcef Souar & Brahim Zirari, 2025. "The Impact of Governance and the Interaction Between FDI and Human Capital on Economic Growth in Arab Countries: A Dynamic Panel Data Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(5), pages 16942-16965, November.
    9. Yeboah Evans, 2024. "The relationship between foreign direct investment and trade openness: Evidence from six developed economies," Economic and Regional Studies / Studia Ekonomiczne i Regionalne, Paradigm, vol. 17(2), pages 222-250.
    10. Scalamonti, Francesco, 2024. "The foreign investments-growth nexus in underdeveloped countries: the state-of-art of research analysing a selected and recent empirical literature (2020-2022)," Technological Forecasting and Social Change, Elsevier, vol. 198(C).
    11. Ofori, Isaac K. & Gbolonyo, Emmanuel Y. & Ojong, Nathanael, 2023. "Foreign direct investment and inclusive green growth in Africa: Energy efficiency contingencies and thresholds," Energy Economics, Elsevier, vol. 117(C).
    12. Chimere O. Iheonu & Godfrey I. Ihedimma & Charles Mbohwa, 2026. "Volatile Energy, Stunted Investment: How Energy Price Inflation Shapes Foreign Direct Investment Into Africa," World Affairs, John Wiley & Sons, vol. 189(1), January.
    13. I. D. Medvedev & G. I. Krivenko, 2024. "Assessing the Impact of Foreign Direct Investment on the Probability of Macro-Financial Overheating," Studies on Russian Economic Development, Springer, vol. 35(1), pages 109-115, February.
    14. Avni H. Alidemaj & Anatoljis Krivins & Esat Durguti & John McArdle, 2025. "Economic Freedom Index and Foreign Direct Investment: Bridging the Gap between Developed and Emerging Economies," Central European Business Review, Prague University of Economics and Business, vol. 2025(5), pages 1-22.
    15. Ahmed Nazzal & Angels Monserrat Niñerola & Maria-Victoria Sánchez-Rebull & Maria Glòria Barberà-Mariné, 2025. "A systematic mapping review of foreign direct investment by multinational corporations in emerging economies," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-18, December.
    16. Ionuț Nica & Irina Georgescu & Jani Kinnunen, 2025. "Economic Growth, Innovation, and CO 2 Emissions: Analyzing the Environmental Kuznets Curve and the Innovation Claudia Curve in BRICS Countries," Sustainability, MDPI, vol. 17(8), pages 1-38, April.
    17. Toby C. Monsod & Aleli D. Kraft & Cielo Magno & Jan Carlo Punongbayan & Orville Jose C. Solon & Elizabeth Tan & Agustin L. Arcenas & Florian Alburo & Emmanuel S. de Dios, 2024. "How to change a constitution by hand-waving (Or, the unbearable lightness of evidence in support of lifting foreign ownership restrictions)," UP School of Economics Discussion Papers 202401, University of the Philippines School of Economics.
    18. An Song Hoan Vo & Hieu Ngoc Thi Do & Suong Ngoc Tuyet Phan & Suu Duy Nguyen, 2026. "Assessing the Role of Innovation and Human Development in Attracting Foreign Direct Investment: A Panel Analysis in Vietnam," SAGE Open, , vol. 16(1), pages 21582440251, January.
    19. Isaac K. Ofori & Emmanuel Y. Gbolonyo & Nathanael Ojong, 2022. "Foreign Direct Investment and Inclusive Green Growth in Africa: Energy Efficiency Contingencies and Thresholds," Working Papers 22/089, European Xtramile Centre of African Studies (EXCAS).
    20. Lee & Cheng-Wen & Mendy & Patrick A., 2025. "A Bivariate Causality Analysis on the Impact of Foreign Direct Investment Inflows on the Economic Growth of The Gambia," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 15(4), pages 1-2.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0334043. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.