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    Deregulation and foreign direct investment : lessons for heavily regulated countries.
    (2012-10-17) Kitunzi, Mutunzi Ahmed
    Countries with high levels of growth-fostering business deregulation for domestic small and medium scale enterprises (SMEs) appear to attract more FDI inflows than countries with low levels of business deregulation. This may be because SMEs in such deregulated countries attract ample cross-border mergers and acquisitions (M&As), which are a major conduit of FDI inflows. This study therefore investigates the relationship between FDI inflow and business deregulation. The study employs a triangulation of quantitative research methodologies and a panel data of 154 countries to analyze the relationship between FDI and deregulation. Results from the study generally show that there are statistically significant and inversely proportional relationships between inbound FDI and the deregulation of: (i) starting a business, (ii) paying taxes, and (iii) export trading, by a country‘s domestic SMEs. The study also documents positive correlations between cross-border M&As and inbound FDI. Thus, countries are likely to attract more FDI inflows, especially through cross-border M&As, as they deregulate the: starting of businesses, payment of taxes and exportation of products for their domestic SMEs. Therefore, on policy front, it is recommended that in order to enhance FDI inflows, countries ought to deregulate these areas of infringement to efficient running of SMEs; this finding provides a complementary and/or substitute policy to the popular outward-looking incentive programs for attracting FDIs.
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    MNC-borne FDI, absorptive capacity and economic growth: an empirical investigation
    (2011-10-28) Nhamo, Senia
    The liberalization of FDI is deepening, so have the incentive schemes put in place by a number of countries. Investment promotion agencies in these countries are seen to be actively promoting their countries as the best locations for foreign direct investment (FDI). With FDI emerging as a fovourite source of capital for most countries, profound questions about the true value of FDI to host countries are addressed in this study. While incentive packages may be justified on the basis of incomplete internalization of FDI benefits by foreign firms, it still remains critical to establish whether these benefits (spillovers) are substantive. As an attempt to answer these questions, this dissertation uses both firm level and country level data to investigate the effects of foreign direct investment (FDI) on productivity and economic growth. The first part of the study uses cross sectional firm level data to investigate whether foreign firms are more productive than domestic firms. We further examine whether there are any significant productivity spillovers from foreign to domestic firms or not. SIn the second part, focus is on country level analysis which uses both time series and panel data techniques. In the time series analysis we use the recent Toda-Yamamoto causality testing framework to determine the direction of causality between FDI and growth for three groups of countries: developing, emerging and developed countries. This is followed by fixed effects and dynamic panel data analyses for the 37 countries (9 developing, 12 emerging and 16 developed) where we test for absorptive capacity effects. Our findings show that results are determined to a great extent by the method of analysis. Interesting findings emerge from this study. The firm level data revealed the importance of multinational corporations in improving domestic firm productivity. With this finding, we anticipate these results to filter through the macro system and show up in the time series and panel data analyses. In the case of developing economies, productivity differences between domestic and foreign firms are confirmed only where the definition of FDI is below the full ownership level. Positive but statistically insignificant spillovers are found in the developing country sample. From the emerging economy sample, we iii find neither significant productivity differences nor related spillovers from foreign to domestic firms. With regards to developed economies, as in the case of emerging economies, there are no statistically significant productivity differences between domestic and foreign firms. Interestingly, for this sample, positive and highly significant spillovers from foreign to domestic firms are documented. The Toda Yamamoto Granger causality framework shows unidirectional causality from FDI to GDP in Colombia, Egypt and Zambia. These results suggest that in these three countries, we have a case of growth enhancing FDI. There is also evidence of causality which runs from GDP to FDI in China, Indonesia, France, Japan, Spain and the United Kingdom. This is a case where higher levels of economic activity attract foreign direct investment. We also find evidence of bi-directional causality for Argentina, Kenya and Thailand. No clear cut relationship between FDI and growth is established in the rest of the countries: Brazil, Chile, Ghana, India, Jordan, Madagascar, Malawi, Morocco, South Africa and all but four of the developed economies. The dynamic panel data analysis for the developing economy sample reveals positive effects between FDI and economic growth. A key finding from this is the negative impact of financial development, an absorptive capacity measure. This unexpected result raises the possibility of international capital flows becoming more harmful to developing economies when extensive development of the domestic financial sector makes it difficult to regulate financial transactions of relatively esoteric financial contracts. This evidence there should be a nuanced embrace of financial globalization by developing economies. In the emerging economy analysis, the roles of openness of the economy and financial development as absorptive capacity indicators are elevated. Overall, the dynamic analysis shows a largely negative and statistically insignificant effect of FDI on economic growth. For developed economies, we find that negative effects of FDI on economic growth are encountered at both the minimum and mean levels of openness. This suggests that for developed economies, a level of openness above the mean value would be ideal for economic growth to be realized through FDI. iv Corroborating our findings with the work of other scholars, we conclude that our results are complementary. It appears that the contradictions inherent in the FDI-Growth literature could be partly due to methodological differences.
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    Foreign direct investment and worker rights : a case study of a private security multinational in Mozambique.
    (2009-03-06T09:08:07Z) Carvalho, Daniela Sampaio de
    This article intends to contribute with the reflection upon the theories that link FDI with social and economical development. For this purpose, the meanings of the expression “human and economical development” will be briefly reviewed, and later it will be approached along the theories on the relation of FDI with development. The theories are used as a support in order to reach this article’s goal of pointing out the FDI impacts on labour conditions on the private security multinational G4S in Mozambique, thus examining the impacts of this sort of FDI towards the country’s human development.