Innovation and foreign direct investment attraction in developing countries

Figures & data

Figure 1. Evolution of FDI inflows in developing countries, 1970–2021.

Source: UNCTAD (2023).

Table 1. Variables measurement and expected signs.

Variable	Acronym	Description	Reference	Expectation
Foreign direct investment	FDI	FDI/GDP (%)	A. T. Nguyen et al. (2022); Economou et al. (2017)
Innovation	INN	Innovation index (score)	S Dutta et al. (2017)	Positive
Market size	MAR	Current GDP (natural logarithm)	Asiedu and Lien (2004)	Positive
Human resources	LAB	Total labor force from 15 years old (natural logarithm)	Rodríguez and Pallas (2008)	Positive
Trade openness	TRA	Ratio of total imports and exports to GDP (%)	Asiedu and Lien (2004); Minh and Trinh (2023)	Positive
Inflation	INF	Consumer price index (%)	Buckley et al. (2010)	Negative
Financial Development	FID	Overall Financial Development Index	C. P. Nguyen and Lee (2021)	Positive

Source: Authors’ work.

Table 2. Variables description.

	FDI	INF	INN	LAB	MAR	TRA	FID
	(% GDP)	(%)	(Score)	(logarithm)	(Logarithm)	(% GDP)	(Score)
Mean	3.64	6.4	29.67	16.01	24.86	70.58	0.27
Median	2.59	3.6	29.35	15.86	24.58	63.67	0.23
Maximum	39.46	557.2	54.8	20.49	30.51	186.47	0.74
Minimum	0.0022	−3.75	16.7	12.44	19.77	16.35	0.06
Std. Dev.	4.09	26.48	6.46	1.51	1.69	30.73	0.15
Observations	594	594	594	594	594	594	594

Source: Authors’ work.

Table 3. Correlation matrix.

	FDI	INF	INN	LAB	MAR	TRA	FID
FDI	1
INF	−0.039 (–0.955)	1
INN	0.057 (1.386)	−0.116^a (–2.829)	1
LAB	−0.222^a (-5.537)	0.012 (0.293)	0.164^a (4.053)	1
MAR	−0.272^a (-6.871)	−0.029 (–0.721)	0.444^a (12.07)	0.837^a (37.15)	1
TRA	0.366^a (9.556)	−0.036 (–0.881)	0.303^a (7.748)	−0.428^a (–11.52)	−0.294^a (–7.479)	1
FID	−0.091^b (-2.233)	−0.048 (–1.162)	0.689^a (23.13)	0.358^a (9.322)	0.635^a (20.023)	0.139^a (3.436)	1

Coefficient (t-statistic).

^a p < 0.01.

^b p < 0.05.

Source: Authors’ work.

Table 4. Panel unit root tests.

	Im-Pesaran-Shin W-stat		ADF-Fisher Chi square		PP-Fisher Chi square
	Intercept	Intercept & trend	Intercept	Intercept & trend	Intercept	Intercept & trend
FDI	−1.12	−0.62	163^b	165^b	305^a	370^a
INF	−5.57^a	−0.96	270^a	192^a	297^a	277^a
INN	3.94	1.04	179^b	120	173^a	364^a
LAB	0.92	3.14	124^c	92	214^a	201^a
MAR	0.13	−1.94^b	153^c	231^a	137	155^c
TRA	−2.75^a	−0.75	190^a	181^a	258^a	189^a
FID	1.02	0.56	127^c	133	193^a	331^a

^a p < 0.01.

^b p < 0.05.

^c p < 0.1.

Source: Authors’ work.

Table 5. Regression estimation results.

Testing for chosen D-GMM
${\delta }_{\mathit{\text{POLS}}}$	${\delta }_{D-\mathit{\text{GMM}}}$	${\delta }_{\mathit{\text{FEM}}}$
0.7501	0.3683	0.2339
Coefficients estimated for Equation (1)(1) $${\mathit{\text{FDI}}}_{\mathit{\text{it}}}={\beta }_0+{\beta }_1{\mathit{\text{INN}}}_{\mathit{\text{it}}}+{\beta }_2{\mathit{\text{TRA}}}_{\mathit{\text{it}}}+{\beta }_3{\mathit{\text{MAR}}}_{\mathit{\text{it}}}+{\beta }_4{\mathit{\text{LAB}}}_{\mathit{\text{it}}}+{\beta }_5{\mathit{\text{INF}}}_{\mathit{\text{it}}}+{\beta }_6{\mathit{\text{FID}}}_{\mathit{\text{it}}}+e_{\mathit{\text{it}}}$$(1) following D-GMM
Variable	Coefficient	Granger causality with FDI
FDI(-1)	0.3683 (21.66)^a	N/A
INF	−0.0014 (−0.20)	No
INN	0.1768 (4.96)^a	INN ⇔ FDI^b
LAB	7.9408 (4.02)^a	LAB ⇒ FDI^c
MAR	0.5030 (1.69)^c	MAR ⇒ FDI^c
TRA	0.0094 (1.93)^c	TRADE ⇒ FDI^a
FID	5.0445 (2.21)^b	FID ⇒ FDI^c
Robustness tests
J-statistic	34.25
Prob(J-statistic)	0.1589
Prob [AR(1)]	0.0035
Prob [AR(2)]	0.4616

Coefficient (t-statistic).

^a p < 0.01.

^b p < 0.05.

^c p < 0.1.

Source: Authors’ work.

Figure 2. Contribution of explanatory variables on FDI.

Source: Authors’ work.

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Data availability statement

The data have been deposited in the Mendeley data repository at the following link: https://data.mendeley.com/datasets/s7brrc9b63/3