Foreign direct investment, technology, and economic growth nexus in emerging markets
Résumé
Type of the article: Research ArticleAbstractThe study explored the impact of FDI on economic growth in emerging markets (Argentina, China, Colombia, Indonesia, Mexico, Peru, Republic of Korea, Turkey, Thailand, South Africa, Philippines, Malaysia, India, Czech Republic, and Brazil). Panel data ranging from 2007 to 2021 were used in this study. The impact of the interaction term (FDI x technology) on economic growth was also investigated using panel-corrected standard errors. The panel threshold approach was employed to examine the FDI threshold level that enables significant positive economic growth. Available literature shows that the nexus between FDI, technology, and economic growth remains a virgin academic and research area because existing empirical results are divergent, mixed, and quite conflicting. Panel-corrected standard errors show that FDI significantly reduces economic growth, whilst higher levels of FDI above the threshold level of 3.16 significantly enhance economic growth in emerging markets. Both econometric approaches employed noted that technology significantly improved economic growth, consistent with theoretical predictions. The conclusion is that higher levels of FDI and technology are of paramount importance in promoting economic growth. This economic grouping was selected because it experienced a rapid surge in FDI, economic growth, and technology in the last two decades, yet research on this topic remains very limited. Emerging markets are therefore encouraged to implement FDI and technology-enhancing policies to promote sustainable economic growth and development.
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