Analyzing how ease of business affects FDI using advanced models
Keywords:
Ease of Doing Business, Foreign Direct Investment, Machine and Deep Learning models, Moderated-Effect, Structural Equation ModelingAbstract
The primary aim of this research is to examine the effect of Investment Facilitation on the Ease of Doing Business and its subsequent influence on Foreign Direct Investment (FDI) inflow decisions. Using SPSS-AMOS regression applications, the impact of Investment Facilitation on Ease of Doing Business indicators was determined. For prediction, Machine Learning techniques, ARIMA in R and Python were employed. Our findings suggest that the ease of doing business rating positively impacts FDI inflow decisions, especially when combined with high investment facilitation. However, the ease of doing business ratings alone might not be sufficient to lure investors, especially in contexts like Nigeria or certain Sub-Saharan African countries. Interestingly, traditional forecasting with ARIMA on R projected a decline in FDI inflow over the next decade, whereas the Python model anticipated an increase. This research highlights the value of integrating quality investment facilitation services with favorable business ratings. Furthermore, while machine learning techniques offer refined forecasts, traditional models provide contrasting insights, accentuating the need for a multifaceted approach in predicting FDI inflow decisions. These insights are crucial for policymakers and stakeholders aiming to bolster investment attractiveness in regions like Sub-Saharan Africa.
References
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Qiang, P. K. V. S. B. V. (2021). The road to recovery in Sub-Saharan Africa: Capitalizing on transformative opportunities from shifting FDI patterns. Retrieved from https://blogs.worldbank.org/africacan/road-recovery-sub-saharan-africa-capitalizing-transformative-opportunities-shifting-fdi
Sabirzyanov, R. (2017). Islamic Financial Products and Services Patronizing Behavior in Tatarstan: The Role of Perceived Values and Awareness. Journal of King Abdulaziz University, 29(1), 16. Retrieved from https://papers.ssrn.com/abstract=3061812
https://papers.ssrn.com/
Sarah, A. W., & daniel, G. (2019). Understanding the role of social desirability bias and environmental attitudes and behaviour on South Australians’ stated purchase of organic foods. In M. Singh (Ed.), (Vol. 74): ScienceDirect.
Services, U. A. (2002). The world of investment promotion at a glance. UNCTAD. Advisory Services on Investment and Training. Retrieved from http://www.unctad.org/en/docs//poiteipcd3.en.pdf
Sharma Pawan, K., Dwivedi, S., Ali, L., & Arora, R. K. (2018). Forecasting maize production in India using the ARIMA model. Agro-Economist, 5(1), 1-6. Retrieved from https://www.indianjournals.com/ijor.aspx?target=ijor:aec&volume=5&issue=1&article=001&type=pdf
Subasat, T., & Bellos, S. (2013). Governance and foreign direct investment in Latin America: A panel gravity model approach. Latin American Journal of Economics, 50(1), 107-131. doi:10.7764/laje.50.1.107
The World Bank, I.-I. (2020). Doing Business. Retrieved from https://www.doingbusiness.org/#
Ting, D. H. (2004). Service quality and satisfaction perceptions. emarald, 22(6), 407-420. doi:https://doi.org/10.1108/02652320410559330
Treviño, F. G. M., Jr. (2004). Strategic factors affecting foreign direct investment decisions by multi-national enterprises in Latin America. 39(3), 233-243. doi:https://doi.org/10.1016/j.jwb.2004.04.003
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Vogiatzoglou, K. (2016). Ease of Doing Business and FDI Inflows in ASEAN. Journal of Southeast Asian Economies, 33(3), 343-363 (321 pages). doi:10.1355/a.e.33-3d
Xia, K., & Devadason, E. S. (2020). China’s Investments in Africa: Does Investment Facilitation in Africa Matter? ELSEVIER, 28. doi:10.2139/ssrn.3714131
Yusuf, M. A. (2020). PhD thesis. (Doctor of Philosophy). Case Western Reserve University, OhioLINK-EDT Center. Retrieved from https://etd.ohiolink.edu/apexprod/rws_etd/send_file/send?accession=case1595283544911804&disposition=inline (case1595283544911804)
Zhang, X., & Daly, K. (2011). The determinants of China's outward foreign direct investment. Emerging Markets Review, 12(4), 389-398. doi:https://doi.org/10.1016/j.ememar.2011.06.001
Aisjah, N. P., Kusuma, R., & Siti. (2020). Understanding country risk toward foreign direct investment moderated by ease of doing business ranking. 18. doi:https://jurnaljam.ub.ac.id/index.php/jam/article/view/1719
Ana Paula, G. (2020). Mediated-moderated effects: High and low store image, brand awareness, perceived value from mini and supermarkets retail. In (Vol. 55): ScienceDirect.
Asiedu, E., & Lien, D. (2011). Democracy, foreign direct investment and natural resources. Retrieved from https://econpapers.repec.org/article/eeeinecon/v_3a84_3ay_3a2011_3ai_3a1_3ap_3a99-111.htm
Bank, W. (2020). Doing Business 2020. doi:10.1596/978-1-4648-1440-2
Bank, W. (2023). Foreign direct investment, net inflows (% of GDP) | Data. Retrieved from https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS
Bank.org, W. (2020). Doing Business 2020 - Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies.pdf. Retrieved from https://documents1.worldbank.org/curated/en/688761571934946384/pdf/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies.pdf
Bevan, A. A., & Estrin, S. (2004). The determinants of foreign direct investment into European transition economies. 32, 775-787. Retrieved from https://econpapers.repec.org/article/eeejcecon/v_3a32_3ay_3a2004_3ai_3a4_3ap_3a775-787.htm
Brc. (2019). Ease of doing business in Nigeria 2020 report - Bomes Resources Consulting. Retrieved from https://www.bomesresourcesconsulting.com/ease-doing-business-nigeria-2020.html
Bri-Mathias, H. (2011). Improved Wind Power Forecasting with ARIMA Models. In (Vol. 29, pp. 1789-1793): Elsevier.
Chaoqun Niu, S. L., Chengwen Kang. (2023). Research on the Influence of the Investment Facilitation Level of the Host Country on China’s OFDIâ€â€ÂÂÂÂâ€â€ÂÂÂÂFrom the Perspective of Investment Motivation. Paper presented at the Springer. https://link.springer.com/chapter/10.1007/978-3-030-92632-8_66
Creswell, J. W., & Creswell, J. D. (2018). Research design: Qualitative, quantitative, and mixed methods approaches (5th ed.). Thousand Oaks, CA: Sage Publications.
Darley, W. K. (2012). Increasing Sub-Saharan Africa's Share of Foreign Direct Investment: Public Policy Challenges, Strategies, and Implications. doi:Journal of African Business, Vol. 13, No. 1, January–April, 2012: pp. 62–69
Dirk De Clercq, W. M. D. M. D. (2010). The moderating effect of institutional context on the relationship between associational activity and new business activity in emerging economies. ScienceDirect-ELSEVIER, 19(1). doi:https://doi.org/10.1016/j.ibusrev.2009.09.002
Fabian, J. (2023). pyerrors: A python framework for error analysis of Monte Carlo data. In Computer Physics Communication (Vol. 288): Elsevier.
Gaskin, J. (2017). StatWiki. In Gaskination's StatWiki!
Gordon Fullerton, S. T. (2009). Mediating, Interactive, and Nonâ€ÂÂÂÂÂlinear Effects in Service Quality and Satisfaction with Services Research. Journal of Administrative Sciences-Wiley Online Library, 19(2), 124-136. doi:10.1111/j.1936-4490.2002.tb00675.x
Henrik Hansen, J. R. (2006). On the Causal Links Between FDI and Growth in Developing Countries - Hansen - 2006 - The World Economy - Wiley Online Library. Wiley online Library, 9(1), 21-24. doi:10.1111/j.1467-9701.2006.00756.x
Imf. (2019). World Economic Outlook, October 2019: Global Manufacturing Downturn, Rising Trade Barriers. IMF. Retrieved from https://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019
Intelligence, f. (2022). fDi Intelligence. In F. T. Ltd (Ed.), (pp. 66). London: Financial Times.
Johnson, P. O., & Fay, L. C. (1950). The Johnson-Neyman technique, its theory and application. Psychometrika, 15(4), 349-367. doi:doi:10.1007/BF02288864
Leonard J, T. (2000). Out-of-sample tests of forecasting accuracy: an analysis and review. In (Vol. 16, pp. 437-450). ScienceDirect: Elsevier.
Lien, N.-H., & Kao, S.-L. (2008). The Effects of Service Quality Dimensions on Customer Satisfaction Across Different Service Types: Alternative Differentiation As a Moderator. ACR North American Advances, NA-35. Retrieved from https://www.acrwebsite.org/volumes/13639/volumes/v35/NA-35
https://www.acrwebsite.org/volumes/v35/naacr_vol35_488.pdf
MacKenzie, S. B. A., Podsakoff, P. M. A., & Podsakoff, N. P. A. (2011). CONSTRUCT MEASUREMENT AND VALIDATION PROCEDURES IN MIS AND BEHAVIORAL RESEARCH: INTEGRATING NEW AND EXISTING TECHNIQUES. MIS Quarterly. Jun2011, 35(2), 293.
Miller, J. (2018). Doing Business in Sub-Saharan Africa. Retrieved from https://www.brookings.edu/blog/africa-in-focus/2018/11/09/figures-of-the-week-doing-business-in-sub-saharan-africa/
Mohamed Tareq Hossain, Z. H., Sumaiya Shafiq, Abdul Basit. (2018). Ease of Doing Business and Its Impact on Inward FDI. Indonesian Journal of Management and Business Economics, Vol.1, 65. Retrieved from https://portal.issn.org/resource/issn/2620-7206
Nketiah-Amponsah, E., & Sarpong, B. (2020). Ease of Doing Business and Foreign Direct Investment: Case of Sub-Saharan Africa. International Advances in Economic Research, 26(3), 209-223. doi:doi:10.1007/s11294-020-09798-w
Piwonski, K., & Bryant, U. (2010). Does the ‘Ease of Doing Business’ In a Country Influence its Foreign Direct Investment Inflows? Retrieved from https://digitalcommons.bryant.edu/cgi/viewcontent.cgi?article=1012&context=honors_finance
https://digitalcommons.bryant.edu/honors_finance/13
Qiang, P. K. V. S. B. V. (2021). The road to recovery in Sub-Saharan Africa: Capitalizing on transformative opportunities from shifting FDI patterns. Retrieved from https://blogs.worldbank.org/africacan/road-recovery-sub-saharan-africa-capitalizing-transformative-opportunities-shifting-fdi
Sabirzyanov, R. (2017). Islamic Financial Products and Services Patronizing Behavior in Tatarstan: The Role of Perceived Values and Awareness. Journal of King Abdulaziz University, 29(1), 16. Retrieved from https://papers.ssrn.com/abstract=3061812
https://papers.ssrn.com/
Sarah, A. W., & daniel, G. (2019). Understanding the role of social desirability bias and environmental attitudes and behaviour on South Australians’ stated purchase of organic foods. In M. Singh (Ed.), (Vol. 74): ScienceDirect.
Services, U. A. (2002). The world of investment promotion at a glance. UNCTAD. Advisory Services on Investment and Training. Retrieved from http://www.unctad.org/en/docs//poiteipcd3.en.pdf
Sharma Pawan, K., Dwivedi, S., Ali, L., & Arora, R. K. (2018). Forecasting maize production in India using the ARIMA model. Agro-Economist, 5(1), 1-6. Retrieved from https://www.indianjournals.com/ijor.aspx?target=ijor:aec&volume=5&issue=1&article=001&type=pdf
Subasat, T., & Bellos, S. (2013). Governance and foreign direct investment in Latin America: A panel gravity model approach. Latin American Journal of Economics, 50(1), 107-131. doi:10.7764/laje.50.1.107
The World Bank, I.-I. (2020). Doing Business. Retrieved from https://www.doingbusiness.org/#
Ting, D. H. (2004). Service quality and satisfaction perceptions. emarald, 22(6), 407-420. doi:https://doi.org/10.1108/02652320410559330
Treviño, F. G. M., Jr. (2004). Strategic factors affecting foreign direct investment decisions by multi-national enterprises in Latin America. 39(3), 233-243. doi:https://doi.org/10.1016/j.jwb.2004.04.003
Ulf Andersson, A. C.-C. B. B. N. (2019). Explaining Interaction Effects Within and Across Levels of Analysis | SpringerLink. Research Methods in International Business, 331–349. doi:10.1007/978-3-030-22113-3_16
Unctad. (2002). The world of investment promotion at a glance:: a survey of investment promotion practices. Retrieved from https://digitallibrary.un.org/record/456940
https://digitallibrary.un.org/record/456940/files/poiteipcd3-en.pdf
UNCTAD. (2019a). unctad.org | Foreign direct investment to Africa. Foreign direct investment to Africa defies global slump, rises 11%. Retrieved from https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2109
UNCTAD. (2019b). World Investment Report 2018 (Vol. UNCTAD/WIR/2018). UN: UN.
UNCTAD. (2020). UNCTAD| INCENTIVES. UNCTAD Series on Issues in International Investment Agreements. Retrieved from https://unctad.org/en/pages/PublicationArchive.aspx?publicationid=332
Unctad. (2022). Global foreign direct investment flows over the last 30 years. Prosperity for all. Retrieved from https://unctad.org/data-visualization/global-foreign-direct-investment-flows-over-last-30-years
Vogiatzoglou, K. (2016). Ease of Doing Business and FDI Inflows in ASEAN. Journal of Southeast Asian Economies, 33(3), 343-363 (321 pages). doi:10.1355/a.e.33-3d
Xia, K., & Devadason, E. S. (2020). China’s Investments in Africa: Does Investment Facilitation in Africa Matter? ELSEVIER, 28. doi:10.2139/ssrn.3714131
Yusuf, M. A. (2020). PhD thesis. (Doctor of Philosophy). Case Western Reserve University, OhioLINK-EDT Center. Retrieved from https://etd.ohiolink.edu/apexprod/rws_etd/send_file/send?accession=case1595283544911804&disposition=inline (case1595283544911804)
Zhang, X., & Daly, K. (2011). The determinants of China's outward foreign direct investment. Emerging Markets Review, 12(4), 389-398. doi:https://doi.org/10.1016/j.ememar.2011.06.001
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Published
2024-01-30
How to Cite
Yusuf, M. A., & Osiri, J. K. (2024). Analyzing how ease of business affects FDI using advanced models. Journal of Management Science (JMAS), 7(1), 554–564. Retrieved from https://www.exsys.iocspublisher.org/index.php/JMAS/article/view/328
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