Determinants of foreign direct investment in Vietnamese provinces: a spatial econometric analysis

Hoang, Hong Hiep; Goujon, Michaël

doi:10.1080/14631377.2014.874658

Cited by 30 publications

(28 citation statements)

References 44 publications

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“…Our study investigates the determinants of investment location selection at the provincial level in Vietnam based on the foreign investors' perspective. Interestingly, the results show that foreign investors tend to invest more into areas offering fewer investment incentives, which is different from the findings of Hoang and Goujon (2014), Vu et al (2009), Li and Shen (2008), and Oman (2000). The proposed IIP index includes free land, income tax and import tax exemption instead of considering only tax incentives in previous studies such as Wei and Li (2011), Li and Shen (2008), and Sun (2002).…”

Section: Introductioncontrasting

confidence: 78%

“…Vu (2007) reveals that in provinces adopting extra-legal incentives, there is a decrease in the amount of FDI per capita received the year after adoption of those incentives. However, according to Vu et al (2009), Vietnam made the greatest efforts to regulate sub-national incentives; and provincial policies were identified as important factors to attract more FDI (Hoang & Goujon, 2014). Therefore, whether investment incentives reduce or raise the amount of FDI or make any differences in the investment location selection at the provincial level in Vietnam is debatable.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Investors' subjective decisions in choosing the investment's location are important to the economic growth and development of host countries. However, few researchers (Hoang & Goujon, 2014;Vu et al, 2009;Nguyen & Nguyen, 2007) have focused on this topic in Vietnam and their results are inconsistent. Hoang and Goujon (2014, p. 103) find "a dominance of the regional trade platform FDI and regional agglomeration effects".…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Investment location selection: Strategies for foreign direct investment in Vietnam

Ho¹,

Gan²,

2019

El Sawah, S. (Ed.) MODSIM2019, 23rd International Congress on Modelling and Simulation.

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Foreign direct investment distribution is unequal in terms of economic activities as well as among regions, provinces and cities within countries. Therefore, understanding reasons why foreign investors favour a location over others are necessary for policymakers, governments, and international investors. Although determinants of selecting investment locations have been studied, different determinants are identified in different countries. Additionally, studies on the investment location selection within a country are limited, especially in Vietnam. This gives rise to questions which factors make a location more attractive to the foreign investors and whether they have similar effects in different provinces and cities within a country. This paper aims to investigate the determinants of investment location selection at the provincial level in Vietnam based on foreign investors' perspectives. The four groups of factors include human capital, economic, provincial competition and institutional, and infrastructure. The study uses panel data set with 63 Vietnam provinces and cities from 2000 to 2015. The ordinary least squares estimation supported by the Hausman test is employed in the empirical estimation. The results of models with and without a lag term are robust. Unlike many previous studies, we employs retail sales of goods and services instead of gross domestic product to represent economic growth at the provincial level. The provincial competitiveness index is employed to represent economic governance of provinces and cities. The investment incentive policies index is proposed as the aggregate index of three types of investment incentives (free land, income tax exemption, and import tax exemption) instead of considering only tax incentives. The country risk index is proposed to represent the political stability and security. Ranking of provinces and cities based on their socioeconomic conditions is employed to investigate the different effects of the determinants in different areas in Vietnam. Surprisingly, this study shows that foreign investors tend to invest more in areas with fewer investment incentives. Additionally, foreign direct investment flows into Vietnam increased after the financial crisis in 2008 as foreign investors may take advantage of lower value currency and lower cost in the areas offering high investment incentives. The effect of infrastructure development on investment location selection is weaker in areas under more difficult socioeconomic conditions. This study suggest that Vietnamese policymakers and provincial governments should invest more in education and training, control exchange rate and inflation rate, enhance investment efficiency, maintain political stability and security, improve infrastructure to boost economic growth, and improve economic governance in addition to offering more investment incentives.

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Section: Introductioncontrasting

confidence: 78%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Investment location selection: Strategies for foreign direct investment in Vietnam

Ho¹,

Gan²,

2019

El Sawah, S. (Ed.) MODSIM2019, 23rd International Congress on Modelling and Simulation.

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“…Also, some papers apply Blonigen et al's approach to investigate spatial linkages at sub‐national (e.g., regional) level, such as Ledyaeva (2009), Sharma, Wang, and Sunny Wong (2014), Hoang and Goujon (2014, 2019), Esiyok and Ugur (2017), and Gutiérrez‐Portilla, Maza, and Villaverde (2019b). There is a clear reason justifying a regional approach: the fact that this type of linkages is stronger the higher the level of data disaggregation, namely the smaller the unit of analysis.…”

Section: Introductionmentioning

confidence: 99%

On the drivers of UK direct investment in the Spanish regions: A spatial Durbin approach

2020

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This paper empirically examines the key factors driving UK direct investment in the Spanish regions over the period 2000–2016 and, consequently, tries to unveil its main motivation. Applying a spatial Durbin panel model to capture spatial linkages, the results point to the existence of complementarity between the FDI received by a region and that of the remaining ones. This outcome, along with a positive and statistically significant spillover effect of market potential, reveals that complex‐vertical FDI motivation with agglomeration economies prevails among UK MNEs investing in Spain. Additionally, our findings unveil the role played by some other FDI drivers, such as wages and infrastructure. Furthermore, the paper is unique in decomposing the average direct and spillover effects by region and pairs of regions, so that remarkable differences can be identified. This breakdown has strong significance from a policy perspective since it can guide regional policy makers. In short, our findings point out to the fact that FDI policy should be jointly designed by those regions presenting strong bilateral spillover effects. Thus, greater cooperation among policy makers would be welcome.

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“…Studies that analyse the role of distance in investment location decisions at the sub-national level most frequently consider relatively limited geographic areas, as in the case of subsets of the EU (Basile et al, 2008;Casi and Resmini, 2010). Several studies focus on intranational investment as in the case of location decisions across states within the US, or across Chinese provinces (Blanc-Brude et al, 2014;Chen, 2011;Sethi, Judge and Sun, 2011), Vietnamese provinces (Hoang and Goujon, 2014) and Russian regions (Ledyaeva, 2009).…”

Section: Conclusion: In Search For An Analytical Modelmentioning

confidence: 99%

Heterogeneity and distance. some propositions on how differences across regions, firms and functions affect the role of distance in fdi location decisions

2014

Economia E Politica Industriale

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Determinants of foreign direct investment in Vietnamese provinces: a spatial econometric analysis

Cited by 30 publications

References 44 publications

Investment location selection: Strategies for foreign direct investment in Vietnam

Investment location selection: Strategies for foreign direct investment in Vietnam

On the drivers of UK direct investment in the Spanish regions: A spatial Durbin approach

Heterogeneity and distance. some propositions on how differences across regions, firms and functions affect the role of distance in fdi location decisions

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