Citation

Seow, Julia Henrietta Fung Su and Tang, Tuck Cheong (2024) Inward foreign direct investment and innovation: Which comes first? Issues and Perspectives in Business and Social Sciences, 4 (2). pp. 154-177. ISSN 2785-9266

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Abstract

This study re-examines the direction of causality between inward foreign direct investment (FDI) and innovation (residents and non-residents) by considering balanced panel data of 56 countries (2000-2020). The vector auto-regressive (VAR) Granger non-causality tests show a direction from FDI inflows to innovation (non-residents), where FDI comes first (FDI-led innovation), while there is bidirectional causality between innovation by non-residents and residents, in general. For developed economies, FDI causes innovation by non-residents, but is caused by residents' innovation. There is no causation between FDI and innovation in either developing economies or economies in transition. These findings were further complemented by impulse response functions and various decomposition tests. Some policy relevance is highlighted.

Item Type:	Article
Uncontrolled Keywords:	Inward FDI, Innovation, Causality, Panel data, Patent applications
Subjects:	H Social Sciences > HG Finance > HG4501-6051 Investment, capital formation, speculation
Divisions:	Others
Depositing User:	Ms Suzilawati Abu Samah
Date Deposited:	10 Jul 2025 09:39
Last Modified:	15 Jul 2025 09:30
URII:	http://shdl.mmu.edu.my/id/eprint/14242

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