Rights statement: This is the peer reviewed version of the following article:Elkomy, S., Ingham, H. and Read, R. (2016), Economic and Political Determinants of the Effects of FDI on Growth in Transition and Developing Countries. Thunderbird Int'l Bus Rev, 58: 347–362. doi: 10.1002/tie.21785 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1002/tie.21785/abstract This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
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Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Economic and political determinants of the effects of FDI on growth in transition and developing countries
AU - Elkomy, Shimaa
AU - Ingham, Hilary Clistina
AU - Read, Robert Allan
N1 - This is the peer reviewed version of the following article:Elkomy, S., Ingham, H. and Read, R. (2016), Economic and Political Determinants of the Effects of FDI on Growth in Transition and Developing Countries. Thunderbird Int'l Bus Rev, 58: 347–362. doi: 10.1002/tie.21785 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1002/tie.21785/abstract This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.
PY - 2016/7
Y1 - 2016/7
N2 - This study investigates the role of human capital, political development in determining the magnitude of the effects of FDI on growth for a panel of 61 transition and developing countries for the period 1989 to 2013. A baseline growth model incorporating these variables is tested and then extended to include FDI interaction effects with human capital (measured using secondary school enrolment data) and political development (based upon EIU Democracy Index scores). These growth interaction effects between FDI and human capital vary according to regime type. Political development in conjunction with FDI appears to suppress the effects of FDI on growth in authoritarian countries while enhancing them in hybrid democracies. For more democratic countries, domestic investment is a more important driver of growth. The effects of FDI on growth in the ten Transition economies included in the sample dataset are found to be insignificant. Although this result might seem to differ from a priori expectations, it is in line with the findings of most earlier studies which cover the period up until 2004. The paper also provides no strong evidence that a critical threshold of human capital is required to generate beneficial spillover growth effects from inflows of FDI. The paper provides new and more detailed insights into the effects of FDI on growth with particular respect to human capital and political regime covering a large number of transition and developing countries based upon an up to date dataset covering a twenty-five year period to 2013.
AB - This study investigates the role of human capital, political development in determining the magnitude of the effects of FDI on growth for a panel of 61 transition and developing countries for the period 1989 to 2013. A baseline growth model incorporating these variables is tested and then extended to include FDI interaction effects with human capital (measured using secondary school enrolment data) and political development (based upon EIU Democracy Index scores). These growth interaction effects between FDI and human capital vary according to regime type. Political development in conjunction with FDI appears to suppress the effects of FDI on growth in authoritarian countries while enhancing them in hybrid democracies. For more democratic countries, domestic investment is a more important driver of growth. The effects of FDI on growth in the ten Transition economies included in the sample dataset are found to be insignificant. Although this result might seem to differ from a priori expectations, it is in line with the findings of most earlier studies which cover the period up until 2004. The paper also provides no strong evidence that a critical threshold of human capital is required to generate beneficial spillover growth effects from inflows of FDI. The paper provides new and more detailed insights into the effects of FDI on growth with particular respect to human capital and political regime covering a large number of transition and developing countries based upon an up to date dataset covering a twenty-five year period to 2013.
KW - Foreign direct investment
KW - economic growth
KW - political development
KW - panel analysis
KW - transition economies
U2 - 10.1002/tie.21785
DO - 10.1002/tie.21785
M3 - Journal article
VL - 58
SP - 347
EP - 362
JO - Thunderbird International Business Review
JF - Thunderbird International Business Review
SN - 1096-4762
IS - 4
ER -