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MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMICS UNIVERSITY

¢

SIHOUNE SITHTHILUSAY

FACTORS AFFECTING THE ATTRACTION

OF THE HOST COUNTRY TO F DI: AN EMPIRICAL STUDY IN LAOS PDR

PHD DISSERTATION IN BUSINESS ADMINISTRATION

MINISTRY OF EDUCATION AND TRAINING

NATIONAL ECONOMICS UNIVERSITY

+

SIHOUNE SITHTHILUSAY

FACTORS AFFECTING THE ATTRACTION

OF THE HOST COUNTRY TO F DI: AN EMPIRICAL STUDY IN LAOS PDR SPECIALIZATION: BUSINESS ADMINISTRATION

SPECIALIZATION CODE: 9340101

PHD DISSERTATION

Supervisor: Assoc Prof Dr LE TRUNG THANH

DECLARATION

[ have read and understood the University’s policy on plagiarism | now declare that this dissertation is my work and does not violate the re gulations on good academic practices

PhD Candidate

SIHOUNE SITHTHILUSAY

1 1.2.3, Joint-ventare Enterprises (Vs) "KH HA

112 4 Other Type GF FDL Poreign Company Bratch Versus Represemativ

- OFF ce ne Mee K1 x2 x27 "¬ TY NA NAY NV ky y2 ¬—

¬- wwe dS

1.1.3.1 Effects: of FDI an Rconomie Oroaash SH 2 SE, Sex TR 1.1.3.2 Effecfs of FDI on Domestic Investment La oe — OL 13,3 Effects of FDI on Employment, Training an and s Wages — rn mraéeeTl

LLBS, Effects of PDI on Market Structure and C -tnpeliflon on — 1.1.3.6 Spillover effect af FDI to local FMS ee, ¬ dS 1.2, Theoretical background on the factors: to attract tEDI lnlows i

“1241, ‡ ClassicaNeo-C -kassical Be conomics and Econoinic Geograph nents „41 (12.1.2, Agglomeration Economics and C “Auster Theory _— _——

L213 Industrial Organization’ Theory — ma —

1.315, Aterngtive theories af multinational company behavior —

+ 2.1, 6 External Factors Conclusions ——

1.2.2 Theories of internal Paclors, testes bsartenlestencevetaee yseetavenunssese MA

12.2.1 The Resource Based Mu so

12.2.2 Sustainable competitive cadvatage theory, S114 15x y9 vs —

2.2.3 - Bebdvioral Theory of the Firm nas v2 mrrenreoeovo.,S7

I 2.3.4 Decision Making wey vesesnes oe a ` X”t tới ce ảo

123.2 Variables Affecting Decision Making "—— - KHANH x25 s L23 3.3 Processes of Decision ` 3A ¬

12.3 A, Branding = ——

1.2.3.5 Location Marketing TT xxx 6y rere ve —- 123 56 Individual Factors Conclusions "5 KHE 2e — ` 14 3 Review of empirical studies on the factors aitecting | FDI Dt decision 6p | 14, Research | BABSnneeeeeiiriiiiieeiri.eu 7E

2.4 Research Process “nrtarneveccnensaransnsenreonaseateateniaessiatessseinseetsitetsstanneressaen

sass TS

2.2.4 Qualitative Research and interview SN Seo PF

3, Survey development nhu men "HH —_ " wo BG

Government Policies, and FDI inflows attraction ve T7

ad Data analysis is approach vei 25 A Sample Size wenn ies 2 Data collection tnetfods Sóc — áa

- ChAPi ER 3% RESULT AND DISCUSSION sinner AA Bd Overview of FDE in Laas

32 3 The model vee

3.3 2 Retiabitity 2 Xeaasevv T20.)

3.24 4 Descriptive analysis of motivation factors AE 3.2.4 "Phe relationship between motivation factors aned the attraction of Laos te PDI

3.2.3 Influence of eontrol variable o on motivation factors and the attraction of Lads

O HAV Reve Lee —— 4+ :

4.2.3, hmprove the efficiency of State imanagement of FD capital —

4.2.5 ‘Increase 3 investment in infrastroctire system ¬ een

426: Ruhanciug the spillover effect of PIM te focal firms ¬— ÔÔ-Ô > A201 Promotion of linkages through supplier development prosrains 1

43, 262, - Fostering demonstration effects ‘Via business mentorship and parmerships A263, Rigorously monitaring FDI spillover j IM cu

42 7 Recommendation for the muhinational companies and local oe es

_x Limitation af the research ard suggestion for future research 1 RESEARCH PRO JECTS RELA TED TO THE DISSERT ATION BY THE PHD CANDE DATE ‘ennvarnnenmnantaatantnstenetnaeteneainesnscnie

LIST OF TABLE

Table 1 1 Ex Table 1.2 Internal Considerations i in the FOLD ovation Decision ¬ 'Table 1,4, indexes of Location Attraction ¬— ©

Table 14, Endividual Considerations i tì the FDI Location Decision ¬ : Table 2 { Toformant details SME ENM EN AMA RON RY mew ey NNO NE ROU AMMEN NER AY ALES

tern ai Considerations j in the E Dị Lacation Decision

eve eM N ever Ney,

UNAS One enon

avvavy evncxcees he

Table 2 2 Questions for Background Information of Questionnaire Surveys oo 8F

Table 23, Measurement terns for Market nà Table 2, Seeking whoa newnnenes

4, Measurement dteïns for RY iciency-Seeking Table 2.5, Measurement Items for Government Policies ¬ Table 3 5 Sarmiary of characteristics: of the sample

Tahle 3.1 KMO and Bartlett’ s Test Table 3.2 Total Variance Explained

Ý vê XS ^Ÿi Nhu

PUNO EME EN AVS EV RAR ee RL CANN a

Table 3.3, Ratated Component Matrix®,

Table 3 3 4 KMO and Bartlett's Test ,

‘Table 3.5.7 otal Variance Explained

~ex>» *Avxazv “SN NT UY NN ĐA VAN XÊN Mục

T able 3 6 Rotated Componesi Matria*

Table : AF, Factors measure motivation that i impact 0 on MNCS

Table 3.8 ttem-Total Statisties Veer aes TT em ENE RR

VN GR ON RON OY Meee Cae PRON EEE Re VS

MELE CAN SOON RON eNO RD NAYS Da en

3.11 hem-Total Statistic DĐ cv — Petawawa cen

3.12 itens- Total Statistics

wv eh ways 88

MOVER NAVE eee Aevaess 8G

aT ¬::

đa N NI MT AM Nhé Xiế An ven seed ] $

—

*ưn UY NAM NV xi ớ NC

WAV ON SR OLD OS rea Asus

decision to invest in Laog120

———_._.= SPN AEN AR ow ev ed NOW Tew CNOA AW Aw TNA Ow OOO MR eet ene VOOR EK ed be, SVAN EVN oem wae

——_ ` MPTP PR ALAN eevee

+ mAanxeeeeses `

wees Xi ke Ất ky

Ê 2 ^w SA Mục

` PUN Ne ĐKAA^MN XÓA mơ

LIST OF FIGURES:

| Figere 2.2 Theoretical Framework of the Study su — Y1 HN vs su, —

- Rigure 3 2 Distribution of PDT in Lao PDR (U Nã KỘ cuc veneer HZ

‘Figure 3.4 Share af ‘accrual FD by country C% of total as of Peb 2021 ' 4 Pigure 3 5 Ten biggest foreign i investors in Lans (2000 - 3021) ¬

Figure 3.6 FDI inflowes ín Laos by sectors in Lads (2000 - 2021) Ea 2xx, _

tì ‘ighte 3.7 Model of factors affection Laas’s attraction tos PDE inflows US cnet 131

APTA

AGEL

AMOS “APEC

ASE AN Free T rade Agreement

Adjusted Goodness-Of-Fit Index

Anal y sis of Moment Structures

Asia Pacitic Economic Co-operation

Association of South East Asian, Naticns |

Average Variance By tracted Business Cooperation Contracts - Bilateral Trade A greement ˆ- Chief Executive Officer

fg onfinnatory Pactor Analysi sis C ‘omparative Fit Index

Critical Ratio Country Specific Advantage

Exploratory Factor Analysis

Foreign Direct Investment - Foreign Jnvestiment Agency Foreign Invested Enterprise | Wholly Porsign-owned Enterprise Firm Specific, Advantagas

Global Financial Crisis Goodnéss-OF Fit Index’

Greater Mekong Sab-y region The International Organisation |

: Investment Promotion Agencies

The International Product Cycle

Joint ventures

Modification Indices -

Wik

Mi

MNC NAICS

_SRMR UNCTAD

` Word Bank World Trade Organisation Dollar

Implied Covariance Matrix Standardise Regression Weights | Normed Chi-Square

Mahalanobis Distance Degree of Freedom Measurement Error of Error C '0variance

Probability > Residuat, Error Tem or Correlation

Shared Variance Coefficient Alpha

7 Regression Weight Regression Coefficient or Factor »

L oadiny Chi-Square

- Normed Chí Sguare

HH

có INTRODUCTION -

1 Rationale

Foreign direct investment DD has been recognized AS AL inpottant resource ter economic dev elopment Many people argue thar the flows of FDI vould fil the Rap

beta een desired investments and domestically mobilized saving it alsa way Mersase

lax revennes and improve tianagement, technology, ag well as labor skills jn hose countries Additicnally, EDL may help the host country to break out of the vicious cycle of underdevelopment (Haya & Godda, 2005)

Many schulars widely believe that the benefits accrued from Rf 3Ì may: include

these benefits are expected to contribute to higher €Cononuc - and Ernploy set growth, Which AS đứt effective mol Tor achieving í improvement ( in the reduction af ‘poverty

Previous studies show that many factors motivate developed counties tạ: favest in developing or less developed countries, Some factors are given, such, 8s Ñuman FfCSOkifC©s advantases and tax Incentives, The tstlls of some models, Such as the flying- geese pattern develuped hy Kajima (2000), saggest that foreign direct investment

| changing the approach found that foreign direc ot investment influences the hast country

Although we have studied countries: with economies in transition, for countries

| Considered “etierging a Vietnam, the conditions are very different from those characterized ‘by Buddhis Sm, like Laos ‘Therefore, the introduction af the host coualy

theoretical thodels of factors from: the host count vside that lave e economies an transition

FEN in order to avoid taking advantage tử chean human or natural FESOUTOES, Lao People’s Democratic Republic (Lao PDR) has implemented the inventive

country, after Lae PDR ay transformed from, the central planning economy td marker

n3ephanisrn int 1986, by opening more cooperation with many countries, and building _ necessary canditions fo attract FOI from aroứnd the world

-Lao PDR has been reasonably successful in atfacting RDI since it implerented

Ministry of Planning and investment, from 2000 f@ thể ecnd of 2017 ; total FDN inflows 7 to Lao PDR were approximately USS 6.429 billion Starting iz 20 19 FDI inflows inte | Laos gradvall ¥ Inereased đưa ta the Luo government's improvement of the investinent

hecessary to research’ Anvestment reception j issues mm Laos,

by allowing 180% sọ foreign ow netship afi investment in 1988, it follow ed by extending of investment concession foom: 20 years in 1999 ig 99 years an 2009, establishing the

depends on promoting zones and investment areas Asa consequence cause FDI inflows in Laos has rapidly increased from US% $8.44 million in 1991 to a peak of US$ 1.4231

` major sources of fordiga investors are from China, Thailand and Vieinam, the three countries covered for 78.2 26% of the total FDL i in during period 1989 201 ấ

FDI is considered to be ñ Sìgnifiocett capital source te support sockal economic development in Laos, and if becomes a crucial factor to Stimulate an economic growth

etfocts refer Io the positive benefits and externalities, thai foreign direct: investment

etitical for domestic enterprises regarding knowledge, technology, linkages,

advanced production processes, managerial expertise and technicn] skills that ‘spillover’

| ta locai workers through one the-job training: and employee turnover into domestic

“companies However, Laus needs — significant expansion of ‘efficiency seeking’ manufacturing FoR fo accelerate this impact Besides, PDY projects that source:

for local sourcing

| Parthermore, the Presence pf, technologicail Y advanced foreign firms can

standards to remain CompeBitve ìn the ¿ domestic market However, Laos’ local private

global supply chains This ertables Laos to expand exports j in more value-added products |

| beyond conunodities |

encompassin g workforce training initiatives, public-private dialogue _ platforms pr ogranis iy furture local SME suppliers, and complicated infrastructure investnients

around PDI projects Assessing and: monitoring spillovers can help local firms benefit from demonstration effects as foreign entrants bring advanced technologies,

management, techniques, and new, market opportuniti ies, Exposure | fo world class:

investors that can deliver these economic spillovers, The lmied existing EDI base

after reaching @ peak of USS i AZI iis TOES, the PDntlows to Laos has reduced gradually | * in recent Yeurs POUinflows was down ta Lt SHOOTS million in 3018 and IS 813 million

hi 2017 UnvestLaus, 2019), The drop: inthe amount of FDI inflows requires shiudkes

exantining factors affecting the attraction uf Laas te FRI From the viewpoint of business managers ‘and owners in Laos, atteaicting more significant EDI 8 essential 4S it presents opportunities te expand local enterprises,

Increased foreign investment Means “greater access 10 adwanced iechnologies, " international business connections, skills transfer and rising domestic demand that local oF mms can capitalizes, Understanding what drives the location choices of multinational corporations guides haw l das can develop & More attractive investment ecosystem for |

helps domestic companies tap into new markets, resources and capabilities brought by | foreign partners &stablishing foal operations

Por managers developing Strate gizs, this research: anped to identify host counery : attributes within Laos that irapact investment: decisions The findings offer practical

industrial and techuological base, far geting Prtiortty FO sectors aligned with domestic

7 international supply chains |

| Evaluating changing investment flows alsa equips business leaders with market

inte Higence around £ oreign partnership opportunities and emerging industries The _lmdings Support Strategic planning aS managers consider options like exporting, joint

investment promotion through targeted initiatives informed by this study < creates § 7

business environment conduci ve to local firm competitiveness and development 2 Research objectives and research questions

Generat ehjective «

inflows, there are very ‘few enapirical studies On the attraction of the host country to PDL |

the attraction of host COMNÍes lò foreign investors but also to introdace factors and validate thera in the context of Laos, with the aim of enhancing the current literatare

decisions iy Laos in order to provide: local businesses with strategic insights on

oplimizing the in vesiment environment’ and maximizing the potential for partnerships,

technology transfe af, supplier link ages and other spillover effects that advance lomestio

"| recommend |

- Ạ

Specific objectives Tn order t achieve the: general: objective of the research, the following specific -

|

“Pilling j ia the gap in the literature about the PDI altraction and spillover effect |

m Assessing the current situation of äiracling FDI into Laos, ~Exploring factors which belong ta Laos’ investment en vironment that affect the decision of multinational companies investing j in Lads

~ Analygin & the impact af factors on FDI inflows BRE Laos ~- Recommending for local enterprises te enhance the investment attraction and

spillover elfect of FD to Jocal busines ASSES, Si ee Si

Research questions

The overall aim of this thesix iS to answer the below nes search question: 1 What i is the current situation of afiracting EDI inl Laos?

3B What can lọc al firms do to attract better EDI inflows and take the best benefits from then?

investing in Laus Stale Management agencies on FRE int BOS

_đ, Research method

This study employs a mixed methods approach tò identify` Factors influencing

foreigu’ investor location - decisions ins Laos, A’ literature review established the

investment locations

ị

Semi-stractuced inferviews with Thatagers of foreign firms in Lads Provided

insights into relevant attraction factors: it Laos’ context, This informed the research

model resting key constructs) tuc

A survey collected tịtaHtiGative data from foreign investors, Bs ploratory factor

analysis tested relationships between these empirical factors and PDY inflows to Laos ‘The qualitative and quantitative phases aim to surface actionable re recomuttendations for Laus to position itself as an attractive host for pr oductivity-enhanci cig investment -

MMrategically T he mixed methodolng gv generates a Buanced understanding Of location determinanis while validating practical policy implications for local business

tompetitivenc 88

5 Research cont tributions

1 heoretical coniribidions — "¬

The thesis uses a demand.- side approach ~ that is, the investment recipient ` 3Ò:

8SSESs ihe factors affecting the transitional economic livestrtent attraction environment,

model (market seeking: effi ilenoy- seeking}, the theary of f€SOiTce based view as well BS the theory of competition {tax incentives: natural resoure 2s and infrastructure),

| Baipirical contributions " Su SỐ

decigion to chooxe Labs ta invest, PDT promote policies, market seeking, and Natural resources: and infrastructure factors strongly, impact foreign investors’ consideration | This result Suggests that policymakers should pay Tho tletf on to supporting aavestors:

infrastructure and make the Market Accessible to foreign tạ vestors,

&., Research structure

After introducing the ov reall content of this study j in the Introduction » chapter, the

| - Chapter 1: kiterature review and theoretical framework on factors affecti ting

: foreign direct inv estment, This chapter first intraduces the definition : and types af PDT

| country, and if also review the Kterature regarding factors affecting investors’ investment Incation, choice of

,

| Chapter 2: Methodology This chapter introduces the research methodology,

inchuding the research framework, questionnaire development, and data collection analysis, and

Chapter 3: Results anid Discussion This chapter presents the trend’ of PIM

inflows globalty and regionally {t also details the picture af FDI inflow in Laos Finally,

it shows the results and discussion of exploratary factors analysis and regression

analysis | SỐ

¬

_ Chapter 4: Concldsion and Recommendation ‘This chapter conciudes this

: | | CHAPTER 1 1, u TERATU RE REV LEW AND THEORETICAL FRAMEY WORK ON

_ FACTORS AFFEC TING FORE IGN DIRECT INVESTME NT

types of FDI aad the effects of EDI on the development of hoxt countries ty addition, - the chapter! & Content also provides an overview of research related to the role ofthe - sountry: in attrac ting F Dt hast

, mas Theoretical framework and Mierature- review an Foreign Direet Investment (FDD) -

11 od Definition of Foreign Direct investment | | Phere are many different definitions of foreign direct investment DD Ror example, đfoskin and Gale (1987) defined FDI AS the infusion of furs Into a subsidiary si by the foreign parent or the: retention of earings hy that subsidiary More simply,

| Drabek and Payne (2002) defined FD as investment in capital stock or assets by a company abroad Slemrod (1990) considered that PDY consists af ©úrnings retained by s subsidiaries and branches of foreign partners and transfers of funds front the foreign | parents to the US firms, inching both debt arn] equity tunsfers, Dunning and Landan

| different’ from foreign portfolio { {tư indirect i imvestirent in (wo important Y€Spects First, |

entrepreneurship, and Sccess to markets across national boundaries: the latter involves

| intermediate products, FOE does not involve change j in ownership: m other words, the control of decision making aver the use of the transferred: resources remains in the hands "

The Intemational Monetary Fund { IME) defines } ‘Di as an investment made to

| acquire jasting interest in enterprises outside the investor's econamy (IM FB, 1993), This

"cpntrol", , focusing more on the “Jasting interest” John Dunning and funcan (2008),

renowned Scholars in the field, defing PDT as the process whereb y residents of one |

country (the source country) acquire, Øwnership of assets tò contri the production, distribution and other activities at z firm in another T country ithe hoạt country, }{ Dunning

& Lundan, 2008 » This definition g tOeb beyond lasting interest and control and focuses

Conference on- Trade and Development: (UNCT AD) defines FDI as ap investment

resident cty an one economy (fore gn direct investor, or Parent enlerprise) Mm an

“enterprise or affiliate enterprise or foreign aft tiliate) aul NCT AD, 2020) This definition

Most all af these definitians are based on a general concept that FE M is capital i in

the form of money or tuterials invested by investors in fore tiến ations to capture |

“Jong-teomt re lationship” Involved in FDI However they differ in their focus on controi,

(WECD) glossary of Standard economic terris SE ‘oreign direct i investinent (PDD is the taiegory of international j livestment that reflects the objective of a resident entity in one

economy to obtain « lasting imterest in an ‘enterprise resident an another econamy”

between the direct j investor and the enterprise, and a significant degree of influence by

investment invalves both the initial transaction between ihe two entities and al subsequent capital transactions between them and among affiliated enterprises: both - incorporated and unincorporated, The key difference ‘between PDI and other forms “Df foreign i investment and multinational corporation (MNC) activity is, therefore, its long-

analysis in research

SỐ ¬ Por the parpose of this research, the FD 1 definition used is based on the OF CD's

def inition dese ribed above _ `

MS

1 1 + 2 Types of ror

There are three main typ pes of EDL operating Structures j int Laos: wholly foreign- owned enterprises {POR} (which includes the form oF joinr- stock and Build — Operation ~ Transfer}; joint-venture: GV) and business cooperation contract (BOC) In aduition, FDI also operates in Laos through the establishment of foreign £oinpamy branches OF 7

" representative offices

L121, Nholy Porei; girowned Enterprises (FOE)

A whally foreign-owned enterprise (POR) is an enterprise owned and established by

assurne fall responsibility for its debts and liabilities, AN existing FOR in Lans May cooperate

“with another FOR and with foreign in vestars ta establish a new POR and a POE may be established AS a joint-stock | company, 8: đmuued fiabiliry company ar a partnership ‘Establishing a POE allows an investor te maintain independence and have managenient

control over ity bustiness operations Por certain businesses, x a FOE may be necessary to |

_ prohaot proprtecary information such as industrial know-how, confidential technologies and business secrets |

|

Fundamental by, Wholly Foreign-Owned Enlerpbisee f WFOEs) are business

“entities established in some countries, particularly | ia China, wholly owned and

autonomy and control over day to-day business and Fiture business decisions A critical

feature of WEOQEs is complete contin! by the foreign parent company over the entity's operations, management, and Sirsiegy, This contro] protec ‘iy the parent campary's proprietary knowledge, technolagy, and operational practices (Ding, 3017) WFORs

plan io inve ast heavily in a foreign tarket and expect significant Tö{trtis ƒWG¡ ¿ 20105 Regulatory 8 Snvironment: WEFOEs atten exist due to specific foreign investment policies

and regulatory environments, Por example, Ching’s economic reform and open-door

đocal industries and ‘employment

WFEORK ¢ san 1 be 2 tool} for mudtinational oi corporations to pain market access and

Qo

| market might require: significant - adaptation and Jocalization regarding products,

SOLS} Despite the advantages, WFOEs ‘also face challenges They bear all the risks

associated with the business Venture, inchuling political, econorc, and legal risks These e entities can also face resistance from local comumiunitias and businesses and might

be subject to discriminatory treatrient OF protectionist tSãsros S (Globennai & Shapico,

3009),

ca

Int conclusion, awhile W POEs offer complete contrat and profi it repatri ation to the

- Market, regulatory environment, and the need for localization

| é 12 1À 2 Joint-venture Enterprises (IV)

A joint venture enteiprise ay yi is an eriterprise established im Laos based On a joint

venture contract signed by fe ar more parties for the purpose uf conducting investment

| a Laotian party and a foreign party: | a a Laotian } party and a wholly foreign owned enterprise:

a JV anda foreign party; si a , cóc al¥ and a whalhy foreign owned enterprise; of iwo IV

ATV may be established : ä 8 limited LHiabitity company, a joint stock COMpany or

a partnership in certain circumstances, a JV thay be established by the government of

Laos and the x government of another country tina FY, corporate profits and risks are

the j jiint venture unless otherwise g agreed in the j joint venture contract, |

Joint Venture Enterprises (IVES) are a common form of Foreign Direct

domestic partners’ Tsk, cost, control, and profits Que critical feature of SV Es is the

This shartag can particularly benefii capital intensive Projects or entail high uncertainty ‘levels,

IVEs can provide foreign investors access ty local marker Knowledge, existing business networks, and distribution ‘channels, which can lo vrucial its successfully

lì

navigating ¿ a foedign market (Beantish & 1, upton, AG), in some countries, forming a IVE might be a regulatory requirenient for foreign | investors io enter specific industries

This regulation can protect dotnestic industries and ensure technology and knowledge :

tensions between the partners The foreign investor might also be concerned about the

perform better than equal or minority: ~owned J¥s due to better control over the venture’s:

Operations and strategy (Gomes-Casseres, 1989}

required by the foreign investor,

Ly Laos, most focal participation (state owned companies) in IVs commonly toniribute to the venture in the form of land ase rights for the venture,

‘, 123 Business Cooperation Contract (BCC) }

A business cooperation contract (BOC is a form -of PDI established via a

comractual arrangenient betw ‘CEH twa af More parties (between domestic and foreign

treated separately far legal and tax ‘Purposes

BCCs are relanively “easy to set ap compared 1 to Wholly Por eign-Owned

Enterpri ses (wh ‘OBs) or Joint Venture © Enterpris SEK (XE §} They deo not require the

contract (Vilnam Law & Legal Forum, 2014) eo BCCs provide operational flexibiHity te | the partners Instead of being bound by the constraints of an independent legal entity, | parties fo a BCC can negotiate and customize their cooperation térms based on thedr needs and objectives Nguyen, 2030) Ina BCC, each party assumes separate legal

| compated to a TV E, where each party can be lable for the other's actions (Vietnam Law -

_WPOEs or IVEs, For example, ín Vietnam, BCCs RE No re aquired fo obtain san

Investment registration certificate for projecrs Oiside | conditional business: fines

(Nguyen, 20201

| có

- However, BCC $ also have drawbacks such as tack af control and potential for ‘dispute, ‘Since the BCC does not cfeate 3 new legal entity, foreign investors may have |

less contre! over the besiness Operation than a WOR, The level of control will depend 7

disputes: betweeri the parties, particularly over profit or product sharing THspute

2020) s

|

“not conducted through a Hrnifed liability company, the investors will be personally fable — for the debts: and liabilities arising from the ‘operations carried ant according te the

contract, Therefore, this form of investment wall be RLOSE suftable for 8 Proj ect Specific

investment that has a defined period of time, : 1"

cv 12d # Other Pye & of ‘PDE Foreign C 'ompany Branch versus Representative Office

A foreign company branch established under Ladtian laws is tegarded as the |

[which inclade investment, On the other hand, 2 represeututive office, also a dependent

foreign investors to explore the viability and Feasibility of a proposed project before

i 1 4, The effects of RDI on the socio-econoniy development of host cotniry

Lod 3 1, Effects of EDI OR Economie Grow tH

Bo

of esonomic growth, particularly in developing nations Infusing capital, know-how, sand

vontingent on the specific circumstances of the hast country, Foreign Direct Investment

although the extent and nature of this effect can vary signific antly depending on the specific context of the host cOURIrY

, |

Neoclassical growth models determine the “yelationship between FDI and

and the Jabor force are a Xogenous, so EDN ï increases domestic Income levels when it has

lo long terre effect OH economic growth Long tenn growth is passible through

technological and population: growth, Uf BDI positively affects technology, it affects

Makki (20041 show that FDI promotes ecouomic gr owth if it increases profits in 7

danport high ‘echnology: application of foreign technology and the lev of of human

| TesOUTcEs,

Findlay (1973) presents the spillover effects of advanced technology

(1999) emphasizes the role of research through PDLina Souniry’s economic growth fn -

barge Recent research ‘analyzes the impact of EDI on economic growth and

Some studies indicate that PDI can stimulate economic ghowth through spiloy er eNects

'f6sotrce devélopmient Uabor skills} (Alguacil et al 2003: : Baharwnshan and Thansoti,

again, demonstrate t that ED] harts ecouomic ¢ growth in some countries, —

l4

Hsiao and Hsiag ¢2 3006) argue that e exports increase EDI becnuse lÍ oens the way for PDI by collecting information about the host country that helps reduce investor ffansaction costs, PDI can also reduce exporis by serving foreign markets and

_ establishing production facilities, Balasubramanyam et, al (1996) tested the hypothesis that promoting FIM exports in Countries like india j is more beneficial than FĐli in other

independent input: in addition to domestic capital and labor, FDI iy @ source at human

attracts external factors such as research transfer, spi Mover eects are very diverse

country, some previously imported gods becorne damestic products Borensstein et al, OCE998) examines the ‘absorptive capacity of the receiving = COuntrv, AS tfteasured by the! total AMOUNE ar manpower required for technological

means of production introduced j into the economy by FDL Research bas demonstrated ‘that the growth effect of FDI requires adequate infrastr Uoture as ú prerequisite,

bank loans}, This resule Rows a significant difference in the impact of capital flows,

_ Indirect and -domestic investment (litte or no impac 0 and the effect af loang between the ather two capital flows, ties _ According tọ a study dons by Pradeep: Agrawal (2000) On the economic impact

Nepal, argue that there exists a impact between foreign and domestic investment ` Firthermore, +e explains that the j impact of FDI inflows n GDP 'Erowth was, negative before 1980, positive in the thiủ- 1 9S0s, and stronger inthe date 1080s and early £9005, Most South Asian countries follawed j impowd substitution policies and had high WHpon _

-tầxes in the 1960s and 19706, These policies gradually changed from 1980 and by the

early 1990s Most countries had eliminating import substitution ktrateghas, market _ oriented policies ate more conducive to international trade {Pradeep Agr awal, 2000) | Brecher and Diaz- Alejandro (1977), provide evidence that foreign capital can reduce

B

trade Such as taxation Maria Carkovie and Ross Levine (2002) | also conclude in- their

economic siưdy af PDI and GDP growth that the EXOVEHAUN components of EDI do not

oe Blomstrom teäjs- {1994 }, andlyzed that PDI inflows positivel ¥ affect the per capita income growth rate in a study of 78 developed and 23 developed countries However,

that less developed countries benefit from multinational companies Because domestic enterprises have outdated te chnology compared: ta foreign enterprises to be able to o keep

gp or become suppliers to multinational enterpris S@S x MNBS), A serninal paper by Borensztein, De Gr eporio, and Lee (1998) found chat For van accelerate economic growth in developing countries, but the e extent of this effect

depends ¿ on the host country's devel of human capital This Suggests that POT alone

workers who can effectively uillize the advanced technologies introduced by foreign —

investors,

host country, such as the developient-of its: 5 financial system, plays 4 crucial role in

facilitating the benefits of FE 2) Ạ

: 1 Regarding Langs specifically, there j is relatively limited empirical literature given

its status as a less- developed and landluoked e COUntry, Ê loweve aE, existing studies offer

PDI and economic growth, Asa Jess-developeif, landlocked tountry, Laos has specific

econoniic and Beagraphic characteristics that may influence the impact of PDL

-economie growth in Leos and found a poslúve relationship, They aiso found that the | benefits of FDI were enhanced with wade liberalization, suggesting that policy reforms fa open up the econoiny can help Laos maximize the henefirg of EDEL Their findings

importantly, they found that the benefits of FPDP in Laos were amplified when combined with trade liber alization, This implies that structural: reforms aimed at opening p the

"TẾ

| economy, such ag reducing trade barriers and i improving the mve estinent climate, can

help Laos fully deverage the benefits of PDL Phonphet ( 2009) examined thei 170DĐAcL of FOYT on the} OD evononiy and found

inequality This study suggests that while PID brings economic benefits, it can alsa exacerbate socio-economic disparities, which policymakers musi- address While his

` FDI led to: increased Income inequality, This nderscores the potential socio-economic " disparities that PDI can exacerbate, partioularly in less-developed countries where

wealth distribution tisy already beumeven, Borensztein, De Gregorie, and ‘Lee (1998) conducted & seminal study

investigating the: influence of FDI on econamic growth in dev eloping nations Their Tindings suggest that F ‘DY accelerates economic ; growth, but the magnitade of this effect

8 sufficiently educated workforce Capable of utilizing and assintlating fhe advanced technologies brought by forei gn investors

Alfaxa SẼ al 2004} exietided this line of inquiry by § examining the role of Flocal tnancial markets in facilitating the impact of EDI on economic #Towth Their fesults

of the host country in maximizing the benefits of FDL A robust financial s sự stern can

help channel EDI into productive ases, such as capital formation ad technological

Moreover, Laos’ reBance tHỆ Hà Ea], resource based BD, paiticutarly in the maining and hydropower Sectors, raises concerns about the sustainabilty of EDE-induced

economic 8rowldiu Sithong ard Nakamura (3019 3 argued thai resource-based FDI cou ig :

sustainable invesiment to ensure long-term economic: development

In conchision, the empirical literature general ¥ supports the pasitive role of FDI an fostering economic growth in developing countries However, the extent and nature”

of this effect depend on various factors, inchuling ihe host country’s tuman capital, financial sysiem, policy environment, snd saci-economic conditions, The case of Laas

"

iftastrates berth the potential benefits aud challenges of FDL While POY can simulate economic growth and development, policymakers’ must address socio-economic

disparities and environmental concerns to ensure inclusive and sustainable development

Li3 3 Liffects af F DF on Damestic Inve SONERT

Foreign Direct Investment (PDE) can significantly influence the domestic

investment, depending on various fuctars ` s | |

countries also feared: expropriation and cdntrol through foreign MNCs Overalh EDI increased welfare due to increased domestic investment Chrough local borrowing and

_ prices (in Particular when MNCs were vertically integrated, as this solved the bilateral monopoly problenr) |

Looking at empirical evidence, EDI could significantly affect a country’s grass

Services and created local Supply links, but had a crowiding-out effect when MNCs ˆ increased competition and drove our domestic fitras A nennber of empirical studies

others found evidence fora ctowding-out effect, ˆ The relationship between FIN and domestic investment is complea On ihe one

managerial skills, which can increase the productivity of domestic fring and encourage

skilled Tabor Agosin aod Machado £20038) Anvestivated the impact of Fe Dĩ On domestic

complements domestic INVeshnent, suze esting that dhe entey or foreign firms can deter

_!Ã

of domestic firms However, a study: by Hermes and Lensink { 2003} found that the draupact

of FDI on doniestic investment depends on ihe host country's financial development In countries with well- developed financial sy stems, FDI tends tO stimulate domestic

investment, as thé financial system can facilitate the transfer of resources from foreign tờ domestic firrns in cObuaN, In countries with underdeveloped financial Systems, roy tends

The interplay between Foreign Direct favestment (Dp and domestic investment

_ Vendck 2006) for Sub-Saharan Aftica, where FIN displaced domestic investment - than complementing it, rather

| Oo | However, contrary findings were presented by Alfaro ¢ et tal {2004}, They found

that FDI could stimulate domestic j ay esbrent, but the strertgth of this relatiouship Was

contingent on the host country’ 8 financial market dev elopment, fn countries with robust financial systems, the: positive effect of POT on domestic investment ‘Was more

foreign canital, Moreover, the study by Borensztein, De Gregorio; and Les (1998), Showed that the impact af PDT on domestic investment aise depended on the hast

labor: force i is better equipped: te asstinilate the advanced technologies brought by PDT

effect of capital inflows on domestic investment, found EDI {Oo increase domestic

investment and to have a larger elfect than, pordtolo it ‘esQuent or bank: loans According

to Razin (2002), FEN had a a significantly iXNiHive long -Ttm effect on domestic investment,

which was larger than the eff ext of portfolio i investment and Joan inflows Using quatterly

data, Deok-Ki Kim and See (2003) atialysed the relationship between FDI, domestic -

investnien? and econoric gtawth in Korea, estimating a VAR anid applying impulse

domestic inv estment was allowed to be contemporaneously endogenous, the response was |

Positive, but not statistically Significant, tn cơntrật, doinestic investraent had a Significantly

lộ.

_ hegative effec on EDI, FDM had a Significantly positive effect on economic growth, while,

| dt turn ecanomie growth increased FDL

The ¢ case of Laos provides axe interesting contear to study thie wHpact of ED on domestic investment, given its status as 4 less-developed, landlocked country actively

È ‘Di, particularly in ‘the mining and hydropower sectors, has increased doniestic í Ínyestnent

ìn related industries, such as consiuction aud services, due to the demand created by these

on domestic in vestment in Laos might not bs sustainable They Pointed out that the reliance “On Rahival resouive based £ + could lead tÒ economic vulnerability due to commodity price

Jong tun Moreover, the Jack of spillover effects front, resource-hased FDI, such as

technology transfer and skill development, could limit the potential of FDI to stitmalate domestic i tnvestment

Sisomabat, Villano, and Mounter (2016) found that Ì 0H positively influenced

: domestic investment, particularly j in the mining and hydropower sectors, The large- scale

the tverrelionce on resource-based POY They argued that sạch dependence could lead to

degradation These risks could, tn turn deter domestic investors, hunting: the: economy's

long-term growih prospects Phouphet (2007) also noted that while FDL has boosted ” dornestic investment i in Laos, it has ‹ exacerbated income: inequality This finding implies — that the henefits of PDL are not equally distributed, ‘potentially leading to social tenajons thse conde negatively i impact the i investment climate —- cuc | |

Thus, while: FDI cạn influence: domestic Rvestment in developing couttiries

Policymakers need 0 consider these complexities te optimize the benefits of EDL tor ‘domestic invesiment and broader economic đevelopiuent |

of PIM, the host country’s s financial developruent, : arid the policy envy iranment Pobe ymakers

need to carefully manage FDI to ensure that it it complements rather than s substitutes s donestir

20

investment, and to promote sustainable and inclusive economic development Lor 8

L 13d Effects of FOL On Employment Training and Wages | Employment creation ‘and the effect on Wages are other lmportant effects

anal ysed i in most theoretical models, Since PDL is investinent leading to Incal production and thus eraployment, it is generally s Seen as having a postive effect on n employment, taining and Wades,

“larger capital stock and increased, employment (MacDougall 1960) Mundell 957)

showed that factor mobility created hy international factor price differentials substituted

for g goods trade and Jed tơ factor price equalisation on the goods and factor markets, with relative prices equal to the value i in free trade equilibrium, According tò Streeten (1 969}, _Rười ign investment also led to the creation of direct and indirect employment, the

training of workers, the creation of new skills, and the provision of management, the _ training of local managers and an increase mì domestic wages,

Dunning and Laindan (2008) found that FDI led to the creation of direct and

better than: employment i in local Rems depended on the Rost economy, market Structure, |

favotirable 'cuRural ethos and an appropriate educational and technological :

infrastructure were in place There were also a variety of studies analysing the effect of

EDI on increased employ merit or reduced tihernpioy ment, Brander and Spencer (1987)'s

model of endogenous tariffs and taxes and unemployment showed that FDI increased

muRiple govertiments subsidies could increase EDT in high-ware countries (competing

countries gained from increased employment 1m: relatively backward areas, the overall |

| Bains depended on the type of investment support,

Turing ts empirical studies of the consequences of FDI on haman capital, FDI

had a positive effese in inany empirical studies itypically based o on industry-specifie or plantlevel data in a single country), MNCs could fill critical management EAps, create employment and transfer skills te local workers, managers and domestic firms, However, effects in individual Cases depended on the MNCs" “practices, on the

regulatory environment in Host | countries and the initial skill level oF local

employees The skill transfer vas larger the higher the initial skill level was, The | extent af labour spillovers alse depended on whether the technital skills were firm- specific or generally applicable,

+ 2mpiieal evidence alsa showed that f DE raised labour productivity and inc reased wages amor enaployment through an increased capital stock, However, the

of a Hast Country ’s employment, the quality of these jobs was Sometimes questionable

Some of the: Jobs displaced employment an domestic firms, and thus ‘did nơi have 7 benefic viale effects for the economy, though this was difficult to test empirically

1ì Apsey and Siéholm (20045 analysed the link between FOL and wages in

collar workers than in domestic tương, There Was strong evidence that the higher ware - in foreign firms Was due ti higher tabour quality (e.g higher cducation), while only a

ab B29) found that wages in for merly domestic firms increased by 3 4% : ta 4 286 after

foreign acgprisition due fo increaxed labour produc tivity, "Analysing the effect of FDI on industry- specific average wages, generafly

finding a positive relationship, Aitken et al, (19963 found average Wages ta be higher

“growth was due to higher Wages in the foreign firms and a large wage differential

between foreign-owned and domestic B aims for Mexico ai Venezuela Only for the US was the positive effect on industry: Specific wages dae to bath higher wages in foreign

firms and wage snillavers to domestic firms The wage, differential was staaller, but it

still existed Even after controlling for: Siưe, geographic location, skill ivsix and capital

intensity of the industry, te wage differential persisted Fighe and Blonigen (2000) tXamined the effect of FDI on wages In local communities in South CO Carolina using —

3

domestic i investment, However FIM also had the unwanted effect of lowering the | per

caphia county -government expenditure and redistributing money: away from public school expenditure,

| ' Driffield and Girma £2003) ased annual data for 395 plants j tt the UK electrical

gad electronic industry tủ estimate a sigultaneous dynamic ‘panel data framework "

wage spillovers through MNCs, though these were limited to industries and | Tegions that

demand for beth skHled and gnakiHed labour, thereby increasing - wages overall However, for skilled labour, domestic farms increased Wages to keep key staff, so that

ihe: effec cb Was more pronounced on skilled than on unskilled WAKES, - Foreign Direct Investment (EDI jis often hailed as a crucial driver of economic

growth ina developing countries, particularly its potential fo create jobs, boost w ages, and

_ Studies have found positive employment effects of EDT, Pari iustance, Alfaro et al (2004) found that EDI positively impacts job z growth, Similarly; Bosco (28H) showed that multinational enterprises iIMNES} gene state employment in host countries, However,

due to restructuring er efficiency -seeking strategies of MNES, PDT is often associated with the transfer of technology and knowledge, which can lead ta increased skills -

found that EDI can contribute significantly to human capital formation ì iy host countries,

> Nevertheless, Cire and Greenaway (2004); argue: thất the skili upgrading effects may bre limited tờ higher-skilied workers, potentially exavstbating income inequality

Fpl ran lead to higher wages, directly in foreign firms (Aitken etal, 1996) or indirectly | Via spillover effects to domestic fng (Lipsey and Si8họm, 2004), However, the extent |

of wage increases can depend on factors such as workers! education level (Te Yelde an - Morrissey, 200 Y aod the sectors in which Toreign firms operate (Harrison and Scorse, 2010)

| :

—Thế,p paper “by Agosin and ‘Mac bađo (2005) investigates how foreize direct

@ đưroad ‘panel dataset of 32 developing countries over ] 970-1996 tọ analyze: the

crowding-Ht òc crowding -out ettects of eDE on domestic investment In the paper,

factitate access to- international markets, and enhance efficiency, which can stimulate:

they absorb scarce resources such as labor or capital The enipirical analysis in the paper

FDI borts domestic investment, _ sug gesting & erowding-out effect, Agosin and

Machados ( (2005) s8 nd that 2 15 increase in the FDLo-OOP ratio leads to a decrease -

in the domestic j ‡0vesunem-to-GDP ratfo of about 0.4-0, 6% This finding suggests that

crowding-out ef fect of FD is fess pronosiced in '©iuntries with well-developed

trtlgate the negative effects of PDI by providing domestic firms with better access tợ |

fi inancing, Agasin and Machado’ § (2008) paper presents a nuanced view of the j impact

or FDI on domestic iuvestnent in developing cunitries While PDI can potentially

| growd oul domestic investment, financial development can help mitigate this negative:

_ œrweiali in Maximizing the benefits of PDT for developing £otrtries,

standards, 5 which can, in tam, enhance the focal firms’ productivity, The authors employ

independent variable ic capture the effect ot FDL The authors also control for various có firm auả sector characteristics 16 isolate the specific impact of FDL on tee bnology

transfer, The paper's principal finding is that PIN leads to Significant welfare gains

foreign ow nership } im a sector leads to a substantial se in productivity antong domestic

and Gertler'’s (2008), also note that the benefits of technology transfer are not eventy

are localized and depend 0n the, domestic lưng proximity lò foreign firms In

to local Suppliers However, the beuefits of technology transfer are HOt evenly distributed, Suggesting that policies fo maximise the benefits of PRL should focus on

strengthening linkages between foreign and domestic firnis oo

The United Nations Conference òn Trade and Developnient {UNCT: AD)

analysis on global Foreign Direct lrvestment (PDD trends: ‘The tụng report, titled

affect the host economies Tt can lead to increased capital formation, productivity, and technological progress, However, the report also emphasizes that the j impact of PDI is not unifonmly Postti ve apd depends on the host country’s conditions,

Regarding ‘employ ment, the report argues that EDI cạn create jobs in : developing

rountries However, it also acknowled ges that the net eraployment effect ni ght be small

s PDL can increase wages in developing countries, It suggests that foresy RR firms gi ben pay

higher wages thant their domestic counterparts However; this Wage effect can depend

On the bargaining bower of workers and the extent of technology transfer The report

prefinring to hire highly skilled’ workers, AS for training and skill development, the | ; report underscores the pofential of Ị ‘DY lo enhance human capital in host countries bự

Wars that these benefits often accrue to skilled workers, which can widen the skill gap

23

In conclusién, the [909 UN CTAD World Investment Report provides | & compr cheusive:

analysis af the impact at FOL on, developing : g economies, Iracknoy ledges the potential

" benefits of POL but highlights the challenges and potential adverse effects, emphasizing a

The study by Kyophilavoag et al Ộ 016 €Kaiiies the relationship between Las‘ trade, forei gn direct investment (7 pT }, and finahoial development i in driving economic

growth, Using time-series data From 1675 to: 2011 and employing the autoregressive

analysis of the long-ran and short Tun dynamics of these relationships j in the context of - Laos The &uthors propose that BDI can spur economic growth by transferring advanced

liberalization and financial development Can stinulate econorrde stowth by improving "` allocation, promoting competition, and enhancing fimancial intermediation,

PDL particularly i manufacturing: These resalts confirry that EiW gan enhance economic growth by facilitating technology transfer and skill upgrading -

liberalization for ¢ economic development, This suggests that opening UP fo ìnleriational

rade (ean stimulate economic growth by ex panding market ACCESS for domestic producers and allowing consumers ta benef it from a wider variety af goods and services

iinprovements in financial intermediation ban Spar economic growth, sustaining this

» institutional development and macroeconomic stability In cone lusion, the study By,

| financial development-in spurring economic growth | in Laos ‘The fi ndings underscore the í importance af aliracting FDI, prornoli tự trade lihberaHzaton, and enhaincin g financial

“development for eoonomie đe velopment j in Laws we _

Overall, empirical studies found EDI to have 3 significantly positive effect on

26

training, employ Ment, Creation and average industry-specific wages Wages in foreign: affilates were higher than these in local firms The effect of FDI on wage inequality —

significant effect

hs $4 Effects of F DI on Technology and Produc “hit tự Grovith,

Productivity is 8 key driver of economic growth and w elfare, ahd there is a “substantial body ‘of empirical literature: investigating the impact of Foreign Direct -

fry ‘estment (PDE / On Productivity These studies: suggest that FOL can enhance |

conditions, technological capabilities, and institutional environments While fechnology - transfer in relation io PDI was mentioned in same necelassical trade models, it was

inangpolistic advantages that showed that FE yi led te the transfer of managerial cutrepreneurial skills Or

MacDougall (1960) showed j in his neo lassical trade model that Host countries

_ eonld benefit through production expansion ‘and ‘Positive externalities felated to technolagy diffusion Similarly, Streeten (1969) claimed that foreign Hy éstment | contributed iu Host welfare through technalogy fransfer According to Caves’ U71)

&aperfect rampetition model, in which pr ‘oduct differentiation was the smonopolistic

were able to bypass imperfect external markets for knowledge and diminish barriers to ‘the production, and diff usion of knowledge, they became developers arid transferors of Knowledge and skifls, ereating benefits for both home and host countries, However, weaknesses of MINC-based production anid, knowledge lraiisfer were, the potential replication of research activities by major players anid hence the wastes ul use of lirnited

, discriminatory pricing of know ledge (e.g by dividing markets nationally or regionally

and MNC activities could not be harmonised with Host’s social atid economic

policies ésuch as training fabour, inducing regional migration of workers, reducing the pse oF uapriced natural Fesources) In order tạ maximise Host welfare; MNCs needed to

cooperate with Host! governments, |

Focusis g on technology spillow ers, studies: of manufacturing firms 4 tn séveral host

1960, finding higher foreign shares of industry assets to pasitively affect the value added

(per worker in Australian domestic firma (though the result WAS based on only 23 observations) However, no significant link between foreign ownership and relative

“productivity levels was found in Canada, Blomstrém ‘and Perssan‘s: (1983) study of

spillovers existed and value added in domestic plants WAS Positively affected, by an industry” 8 foreign employment Share:

Studies analysi ng labour productivity effects found a positiv ve Hnk between Ft M and labour productivity or labour productivity giewth Blamstsim (1986) analysed :

industries with higher fi oreign Øtipgt shares had higher fabour Productivity Rr owth j in domestic firms:

industries, labour productivity differences were positively correlated with ars industry's _

were less likely in industries with ‘enclave’ characteristics fsuch as large’ technology |

due: te acquisition, even afler controlling for capital intensity, fixed assets, fixed fire

> eff ects and autonomous techdical changes (4a time duraniies),

v arious studies have found that BDI can boost productivity through technology

bransferring advanced technology and contributing fo human capital formation, In this |

- setninal paper, Borensztein, De Gregoria, and Lee (1998) investigate the impact -of

framework, The authors examine data from 69 dev eloping countries from 1970 to 1089, : prov iding @ broad perspective The authors’ central hypothesis j ig that FD] comributes to

_.EQtrles, and.these technologies are net only adapted hy the foreign fiems but are also diffused throughout the economy, leading to overall productivity improvements, To test:

| ‘their hypothesis, the authors employ an econometric model that controk for other factors of economic grawth, inclading iniial GDP, human’ ‘capital, and domestic investment, The model also includes an interaction terny betwee tn POY ann] trưman capital tò fest

‘The results of the study support the athorg' hypothesis ‘They Find that PDI positively

Moreover thé authors find that FDU is g critical driver of igchnokigy progress

T hey, show that the contribution of EDI io economic growth is primar ily ‘through tectinology diffusion rather than capital ace umulation The study by Bore ensxtehn, De

FDI can enhance SCOUOMIC growth through technology transfer, Howey er, it, ‘also emphasizes that the abiHfy of a epuntry to absarh and take advantage of the technology

brought by FDI is contin gent dn ils human capital base, This finding underscores the importatice af 4 investing in hoan capital developme nt to maximize the benefits of FOL

Similarly, Keller and Yeaple (2009) showed that fore sign firms bring aay ‘anced

(MNEs) in driving productivity growth, “The authors yse-s Coniprcbensive dataset af oy a, manufacturing firms from 1987 to 1066, enabling them to perform a detailed

exami nation of the impact of j international trade and MNE activity On, produ ch vity ‘The

transferring advanced technologies from their hame countries, Moreov ‘OTs | they argue

_ to domestic firms in the host countries, To test their hypothesis, the authors employ.a

structural model that acepunts for endogeneity in firme’ decisions to become MNEs

productivity and the extent of foreign competition The Jpaper’s main finding i is that us MNEs coutribute significantly to productivity growth, beth domestically areal abro pad |

The authors find that a finn’ § decision fo become an MNE: strangly rekites ta its

productivity, Suggesfing thai the Ost productive firras self-select BRO MÌNE šfatbsL Moreover, the authors find evidenes of significant technology spillovers from MNEs to domestic firms They show that a L096 increase in MNE activity in 4 sector

leads ta a 0.5% ineresse in tovat factor productivity among domestic firms This result - Suggests that MNEs aré crucial in disseminating advanced technologies across borders The study by Keller and Vì ‘eaple (2000) provides robust empirical evidence that MNEs

diffusion,

a |

EDI are roi automatic bat depend on s Specific conditions in host economies Por in stance,

Alfaro at al {2004} found that the beneficial effects of FDOT on-prowth are Sstronpeér in economies with well developed financial markers, Simitarty, Blalock and Gertler (2008)

argued that, the productivity gams from FOI are more significant when 1 loc al suppliers

can's absorb ad vanced fores gn technologies

Some studies have reported negative or - insignificant effects: of PDI HE

Spt lovers from EDLto focal firms Sin Venezuela and evan teported that Rorei 84 présence could reduce the productivity af dormestic firms In this paper, Aitken and Harrisan

lầm, using panel data from over 4 B90 Venezuelan gants over 1976-1 989 The authors

competition They fest this hypothesis by examining the relationship between, the foreign

- that controls for unobserved: plant-specific characteristics that could influence:

300