Chung Trinh Thi (p)

Anna D'ambrosio

The study investigates determinants of foreign direct investment (FDI) distribution across 63 Vietnamese provinces. Exploratory Spatial Data Analysis (ESDA) and spatial regressions are employed to analyze cross-sectional data in 2018. Also, a panel data analysis is applied to analyze the data over 2010-2018. The first results show that the spatial distribution of FDI in Vietnam is persistently uneven between 2010 and 2018. While the provinces with a low FDI stock cluster in the Northwest area, the provinces with significantly high accumulative FDI gather in the Southeast region. Secondly, the main results obtained from the spatial analysis for determinants of new-registered FDI in 2018 are as robust as the findings from OLS analysis. However, the role of space is essential to point out the clustering effect of FDI inflows in Vietnamese provinces, helping avoid the estimation bias from the OLS analysis. Thirdly, poverty deters inward FDI from moving into the most underserved areas in Vietnam. The new-registered FDI in 2018 tends to favor the moderate provinces, which do not own a high level of average personal income and a high poverty rate. Fourthly, the results from panel data analysis confirm critical determinants of FDI in Vietnam over the period 2010-2018, including FDI stock, economic agglomeration, market size, income factors, the share of the industrial sector in gross regional domestic products (GRDP), net migration rate, electricity access, and land access index. In addition, new foreign investors pay more attention to the production factors, such as provincial GRDP per capita or labor wage, than the consumption perspective represented by the average personal income. Furthermore, amendment No. 63/2014/QH13 in 2014 in FDI law of Vietnam is found to create an immediate negative impact on new FDI inflows in 2014 but positively support foreign capital inflows into Vietnam for the years after 2014. Regarding policy implications, the study proposes four policy suggestions. Labor mobility and land policy can become practical tools in directing FDI inflows among Vietnamese provinces. Designing FDI policies needs to prioritize the regional development linkage rather than singly promoting FDI inflows into a specific province. It is crucial to develop FDI promotion strategies based on a sub-regional scale by gathering the provinces in each region, especially for the poorest areas in Vietnam. Finally, the government should regularly execute periodic reviews and evaluations on FDI policy to attract more FDI inflows into Vietnam in subsequent periods.

Vito Amendolagine (p), Ulrich Elmer Hansen, Rasmus Lema, Roberta Rabellotti, Dalila Ribaudo

Chung Trinh Thi

Technologies to mitigate climate change may diffuse from green lead markets to the rest of the world through a number of market mechanisms, thereby contributing importantly to the global green transformation. An established body of literature has shown that multinational enterprises transfer technology globally through investment-centered value chains, as firms seek to exploit knowledge in foreign subsidiaries. The Global Value Chain literature proposes that lead firms tend to keep strategic innovation activities in headquarters located in lead-markets and only distribute the non-strategic innovation activities. In other words, cutting-edge innovation capability tends to remain in home countries, whereas only incremental innovation occurs in host country subsidiaries.
This is the proposition we explore in the present paper. We posit that the distribution of green innovation capability depends on industry-level specificity and ‘governance’ of investment-centered value chains as well as host country characteristics and investment modes. Moreover, we explore whether the distribution of innovation in such chains changes over time, motivated by the idea that subsidiary innovation initiatives may influence the direction of global knowledge flows over time. The econometric methodological approach combines lead firm-investment data with patent analysis.

Luigi Benfratelo, Anna D'ambrosio (p), Alida Sangrigoli, Gabriele Scabbia

Vito Amendolagine

Foreign Direct Investments (FDI) have heterogeneously increased across Balkan countries over the last decades. We investigate one likely source of this heterogeneity by using information on 9,185 greenfield FDI locating in 8 Balkan countries from 84 origin countries worldwide over the 2003-2019 period. Notably, we investigate the role of the different phases of the European Union accession process in determining the probability that an FDI will locate in one specific Balkan country. In doing so, we control for standard FDI determinants such as market size, openness to trade, wages and governance as well as different forms of co-location between the new investment and those previously located in the same host country. We stratify our sample in terms of both FDI origin countries—distinguishing between EU and non-EU investors—and industry activity located abroad. Overall, all stages (negotiations, approval, official membership) appear to be associated with positive gains in FDI. Moreover, an anticipation effect emerges from the approval phase, most likely due to the reduction in the uncertainty perceived by investors. The positive effect of prospect membership also extends to the years before official negotiations start. These results also hold when stratifying the sample for industry heterogeneity and origin country of investments, the only exception being the negative effect of EU membership on the location of FDI in manufacturing. To our knowledge, this is the first study to address the issue of FDI determinants in Balkan countries including such a comprehensive set of regressors and exploring country of origin and functional heterogeneity at the investment level, while dealing with the hot topic of the EU accession.