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This study examines the effect of investment promotion through the special economic zone (SEZ) mechanism on foreign direct investment (FDI) inflow across Cambodia. We applied generalized methods of moments (GMM) to panel data constructed from 19 Cambodian provinces during 2015-2019. Our results show that the number of SEZs positively affects both FDI inflow and diversification across the country, while capital invested in developing SEZs increases only the latter. Other SEZ variables, including the presence of SEZ, its intensity, and the age of the first established SEZ in a province, are mostly found to be positively associated with FDI and diversified FDI but not notably significant. Supportably, the existence of SEZ is confirmed to be significant by the t-test method, meaning that the SEZ province can attract more FDI than the non-SEZ one. Some provincial efforts and characteristics, including annual government expenditure, number of public relations, population density, population 18 years old and up, deep-sea ports, and international gates, likely significantly influence FDI inflow into the provinces of Cambodia. All in all, the SEZ mechanism attracts more diversified foreign investment activities, and it has a significant effect on the distribution of FDI in Cambodia.

Motivated by the growing phenomenon of Local Investment Promotion Agencies (IPA) and their paradiplomatic involvement in international negotiations, this paper aims to analyze the role that these agencies have been playing in Brazil and the governance model they adopt. Through the case of InvestSP, the most mature Brazilian IPA, this study examines the topic based on primary documentation and the perspective of various government representatives. As main results, a theoretical framework was proposed to help map the logic of operation of a subnational IPA, its structure, and motivators. Additionally, it was evidenced that paradiplomatic actions have advanced independently by local powers, without effective coordination from the federal government, characterizing a process of (dis) diplomatic governance and institutional inertia.

This article argues whether and how investment promotion agencies (IPAs) efficiently influence investment promotion in the cases of the following selected variables: resources (experience, total staff, and overseas staff), service functions (combined promotion service of inward investment and trade, and inward and outward investment), and organizational structure (autonomous status of private/upper ministry-level IPAs). The results reveal a positive relationship between IPA’s performance and longer experience, larger staff, larger overseas IPA staff members, autonomous private agency types, and upper ministry-level IPAs. However, an IPA’s performance was negatively associated with the combined promotional service of inward investment and trade, and inward and outward investment. The results suggest that an IPA’s performance can be enhanced by adjusting the service functions and restructuring the governance and structure in addition to improving the IPA’s resources and the country’s investment climate.

Information asymmetries constitute a significant obstacle to capital flows across international borders, and in particular to flows of foreign direct investment (FDI) to emerging markets. Many governments aim to reduce information barriers by engaging in investment promotion activities. Despite potentially large benefits of FDI and popularity of investment promotion intermediaries (IPIs), relatively little is known about their effectiveness. This study uses data collected through the Global Investment Promotion Benchmarking (GIPB) exercise to examine whether higher quality of IPI services translates into higher FDI inflows. The analysis, based on information on 156 countries, suggests that countries with IPIs able to handle investor inquiries in a more professional manner and IPIs possessing higher quality Web sites tend to attract greater volume of FDI. These results are robust to using sector-level data and instrumental variable approach. [PUB ABSTRACT]

The provincial investment promotion agencies (IPAs) of South Africa play an important role to attract foreign direct investment (FDI) to the country. In order to do so, investment promotion strategies are developed and executed. This study investigates how the provincial IPAs of South Africa use their investment promotion strategies and points out the gaps in their strategies to attract FDI and improve on the approximate mean of 0.25% of the total world investment inflows from abroad. This contributes to their mandate and goals, which are to enhance economic development and contribute to economic growth by attracting FDI and to assist domestic companies to invest abroad. Both primary and secondary data are used. The study highlights that the majority of the provincial IPAs operate under government direction and that there are significant differences in the investment promotion strategies used. The study finds that 21-40% of budgets allocated for investment promotion go towards perception building. Macroeconomic and industrial policies are the most relevant factors when attracting FDI by the IPAs. The investment promotion (IP) strategies used by the provincial IPAs differ in terms of the investors they focus, the incentives used to attract those investors and the preferred contact method with the targeted investors. IPAs indicated that they use more tax incentives along with tailor made industrial policies, focussed on the specific needs of the investors. 

This study uses newly collected data on 124 countries to examine the effects of investment promotion on inflows of US foreign direct investment (FDI). We test whether sectors explicitly targeted by investment promotion agencies in their efforts to attract FDI receive more investment in the posttargeting period, relative to the pre-targeting period and non-targeted sectors. The results of our analysis are consistent with investment promotion leading to higher FDI flows to countries in which red tape and information asymmetries are likely to be severe. The data suggest that investment promotion works in developing countries but not in industrialised economies.

Investment promotion agencies (IPAs) exist in almost all countries around the world, but there has been no global attempt to determine whether they have been able to significantly influence the investor’s decision to locate in one country rather than another. The Effectiveness of Promotion Agencies at Attracting Foreign Direct Investment is the first empirical study of the effectiveness of these agencies in attracting foreign direct investment (FDI). This study finds that promotion is unambiguously associated with greater FDI flows. The effectiveness of promotion, however, depends on:the quality of the investment climate, market size the level of development of the country the IPA’s budget and type of activities it carries outcommunication with the highest level of policymakers and support from the private sector.An important resource, The Effectiveness of Promotion Agencies at Attracting Foreign Direct Investment provides many lessons about how to carry out effective investment promotion.

We identify inward investment as an important impetus to outward investment, supplemental to the impetuses depicted in conventional internationalization frameworks. By incorporating both the spillover and competition effects of foreign entrants, we develop an integrated framework of the inward—outward investment relationship for different investment modes and different home-country and host-country pairs. Our analysis of venture capital (VC) investments worldwide from 1985 to 2007 shows a positive spillover effect on outward investment for inward co-investments and a negative competition effect on outward investment for inward standalone investments. We find the strongest effects when the host country is a laggard in the VC industry and the home country is a leader.

In this paper we investigate whether better information about the macroeconomic environment of an economy has a positive impact on its capital inflows, namely portfolio and foreign direct investment (FDI). The purpose of our study is to explicitly quantify information asymmetries by compliance with the IMF's Special Data Dissemination Standard (SDDS). For FDI, we find statistically significant and robust support for this hypothesis: SDDS subscription increased inflows by an economically relevant magnitude of about 60 percent. We also find evidence of aversion against political and macroeconomic risk as determinants of portfolio and FDI flows anduse a non-parametric test for spatial correlation in the residual of capital flows.