Uncovering Best Practices of Investment Promotion Agencies

Mattia Tonelli & Bjørn Sivertsen

Student thesis: Master thesis

Abstract

In recent years there has been an enormous rise in Foreign Direct Investment (FDI), which has experienced a 3712% global increase from 1980-2016. Thorough research has shown that FDI is a key catalyst in accelerating economic development in recipient countries. Given its importance, Investment Promotion Agencies (IPA) are a recent endeavour used to attract flows of these investments. While literature on determinants of FDI is plentiful, undertakings in describing the effectiveness and best practices of IPAs are much scarcer. Through an extensive literature review, this thesis identifies the existing gaps in the IPA literature, by identifying three hypothesised best practices, which are empirically tested in panel data regressions covering 16 years and 107 widely heterogeneous countries. Differently from previous studies, World Bank’s income-based classification is substituted by the Investment Development Path (IDP), which allows a more meaningful discrimination between stages of development. Whilst controlling for theoretically grounded FDI determinants, this thesis discovers that Twitter, as an IPA’s promotion platform, can increase inward FDI for countries in earlier stages of development. The findings also demonstrate the beneficial effect on inward FDI of World Association of Investment Promotion Agencies (WAIPA)’s membership for IPAs operating in countries of lesser development. Finally, this thesis finds evidence of a universal positive effect of IPA’s websites translations into “relevant” languages on inward FDI, in accord with our own devised lingual index. Keywords: FDI, IDP, MNE, OLI, IPA, Best Practices, WAIPA

EducationsMSc in International Business, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages156
SupervisorsAri Kokko