Journal Press India^®

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This paper examines determinants of FDI by using conventional pull and push factors along with new variables that might have gained importance in FDI decision making over the years. Based on a sample of 15 EMEs for period 1996-2020, a panel data analysis is undertaken to test significance of various FDI related factors. Empirical results confirm the role of pull factors that determine FDI flows to EMEs. The results suggest that not only the market size, growth and inflation are important as macro factors for FDI investors, the quality of domestic institutions and infrastructure also plays an important role. Among unconventional factors, participation in global value chain also matters for FDI as it ensures that foreign investor find adequate ecosystem to exploit export opportunities and import critical inputs required for domestic production. This analysis helps draw important policy inferences for India, which, otherwise, were not possible in a country-specific analysis.

Keywords

Foreign Direct Investment; Variance Inflation Factor; Panel Data

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