Impact of COVID-19 Pandemic on Foreign Direct Investment – The World Perspective

Abstract

Purpose – Foreign Direct Investment (FDI) has been considered a robust element of globalization that was chiefly immune to financial and economic threats. However, late 2019 introduced international direct investors to COVID-19, a yet unknown risk factor. The aim of this study is to take a holistic perspective and test a research hypothesis of a negative impact of COVID-19 on relative inward FDI activity on the global scale.Research method – FDI is modelled with a series of literature-based determinants including aggregate independent variables that allowed to overcome the issue of too many FDI determinants and model underspecification simultaneously. A series of tests is run on two models (n = 152 and n = 141) to assure their econometric validity.Results – Results show that number of COVID-19 related cases and number of deaths have not had an impact on relative inward FDI on the world scale. Originality / value / implications / recommendations – Unlike most studies, this one exa-mines relative FDI host attractiveness from a global/holistic perspective, which provides additional analytical context. Such determinants as market size, access to qualified labour force and quality of governance are shown to trump risks associated with COVID-19 in determining FDI activity. Policymakers should focus on economic growth, access to qualified labour force and political stability. Hence, lockdown policies were not the optimum solution.