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Determinants of Foreign Direct Investment in Fast-Growing Economies: A Study of BRICS and MINT

African Governance and Development Institute WP/14/002

21 Pages Posted: 10 Sep 2014 Last revised: 12 Sep 2014

Uduak S. Akpan

Sustainability, Policy, and Innovative Development Research (SPIDER) Solutions Nigeria

Salisu R. Isihak

Sustainability, Policy, and Innovative Development Research (SPIDER) Solutions Nigeria

Simplice A. Asongu

African Governance and Development Institute

Date Written: January 8, 2014

Abstract

This study employs panel analysis to examine the determinants of foreign direct investment (FDI) in Brazil, Russia, India, China, and South Africa (BRICS) and Mexico, Indonesia, Nigeria, and Turkey (MINT) using data for eleven years i.e. 2001-2011. First, it uses pooled time-series cross sectional analysis to estimate the model on determinants of FDI for three samples: BRICS only, MINT only, and BRICS and MINT combined; then, random effects model is also employed to estimate the model for BRICS and MINT combined. The results show that market size, infrastructure availability, and trade openness play the most significant roles in attracting FDI to BRICS and MINT while the roles of availability of natural resources and institutional quality are insignificant. Given that FDI inflow to a country has the potential of being mutually beneficial to the investing entity and host government, the challenge is on how BRICS and MINT can sustain the level of FDI inflow and ensure it results in economic growth and socio-economic transformation. To sustain the level of FDI inflow, governments of BRICS and MINT need to ensure that their countries remain attractive for investment. BRICS and MINT also need to ensure that their economies absorb substantial skills and technology spillovers from FDI inflow to promote sustainable long-term economic growth by investing more in their human capital. The study is significant because it contributes to literature on determinants of FDI by extending the scope of previous studies which often focus only on BRICS.

Keywords: FDI, determinants, fast-growing economies, BRICS, MINT

Suggested Citation

Akpan, Uduak S. and Isihak, Salisu R. and Asongu, Simplice A., Determinants of Foreign Direct Investment in Fast-Growing Economies: A Study of BRICS and MINT (January 8, 2014). African Governance and Development Institute WP/14/002. Available at SSRN: https://ssrn.com/abstract=2493410 or http://dx.doi.org/10.2139/ssrn.2493410

Uduak S. Akpan (Contact Author)

Sustainability, Policy, and Innovative Development Research (SPIDER) Solutions Nigeria ( email )

15 Etim Umana Street
Eniong Offot
Uyo, Akwa Ibom State
Nigeria

Salisu R. Isihak

Sustainability, Policy, and Innovative Development Research (SPIDER) Solutions Nigeria

15 Etim Umana Street
Eniong Offot
Uyo, Akwa Ibom State
Nigeria

Simplice Asongu

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

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