Economic, Social and Technological Determinants of Foreign Direct Investment Inflows: A Worldwide Analysis

Abstract

Governments and the business environment are constantly motivated to attract foreign direct investment (FDI) due to its catalytic impact on innovation, economic and human development. The existing consistent literature of the domain reveals an impressive variety of factors that influence FDI. This study investigates the impact of several categories of economic, social and technological determinants on FDI, for 101 countries around the world, between 1990 and 2022. A combination of static and dynamic panel methods (system GMM) was applied in accordance with the data properties. The results reveal the contribution in attracting FDI of economic growth, government expenditure, ICT value added and urbanisation. In contrast, countries facing increases in unemployment and inflation are less desirable for investors, who are more interested in economically and socially stable areas. Also, states with high gross national income per capita seem to be discouraging for investors, who prefer emerging markets with higher growth potential. In this case, the public authorities should implement public policies aimed to enhancing the economic, social and technological landscape, in order to increase the confidence in the national economy and mitigating risks for investors.