The Causal Relationship Between Information and Communication Technology and Foreign Direct Investment

Abstract

This paper investigates the simultaneous causal relationship between investments in information and communication technology (ICT) and flows of foreign direct investment (FDI), with reference to its implications on economic growth. For the empirical analysis we use data from 23 major countries with heterogeneous economic development for the period 1976-99. Our causality test results suggest that there is a causal relationship from ICT to FDI in developed countries, which means that a higher level of ICT investment leads to an increase inflow of FDI. ICT may contribute to economic growth indirectly by attracting more FDI. Contrarily, we could not find significant causality from ICT to FDI in developing countries. Instead, we have partial evidence of opposite causality relationship: the inflow of FDI causes further increases in ICT investment and production capacity. Copyright United Nations University 2006.

Impact of E-Government on Transaction Cost and FDI Inflows: A Proposed Conceptual Framework

“…In this regard, the role of Information Communication Technologies is to act as devices which may be used to acquire and process information thereby reducing uncertainties and transaction cost (Addison & Heshmati, 2004;Bedia, 1999). The basic premise of this argument is that the advent and successful adoption of ICT particularly Internet is said to simplify accessibility of commercial and political information that was previously unavailable or hardly restricted by economic actors (Gholami et al, 2006). For example, Internet is considered as the helpful tool to disseminate and promote investment opportunities (Lozada & Fishler, 2005) and thus facilitates internationalization process (Danford, 2007(Danford, , 2008.…”

Quadrilateral Relationship Between Information and Communications Technology, Patent Applications, Research and Development Expenditures, and Growth Factors: Evidence from the Group of Seven (G-7) Countries

“…low wages, human capital, political stability and natural resources. The role of changes in the global economy, specifically ICT dramatically observed with increased FDI inflows across the countries (Gholami et al 2006). Kim and Seo (2003), Shan (2002) and Bengoa and Sanchez-Robles (2003) all studies confirmed the positive contribution of FDI towards productivity and growth in specific environments i.e., in case of knowledge workforce, FDI is found to have positive contribution, while Carkovic and Levine (2005) claims that there is no association between FDI and growth and these findings must be viewed skeptically.…”

Internet-based information and foreign direct investment (FDI) location decision making: An information cost perspective

“…By providing egovernment services, the supply side can update information and reach as many customers as possible; while on the demand side, information can be accessed at any time regardless of the geographical distance (Nooteboom, 1992). The improved market function resulting from new information technologies is expected to reduce information cost and therefore the subsequent transaction cost (Clemons and Row, 1991;Gholami et al, 2006;Gurbaxani and Whang, 1991).…”

“…The basic premise of the argument is that the advent and successful adoption of ICT is said to simplify accessibility of commercial and political information that was previously unavailable or restricted by economic actors (Gholami et al, 2006). Based on this view, ICT can adequately offer opportunities for public and private information accessibility, which can ultimately reduce the liability of foreignness (de la Torre and Moxon, 2001).…”