The causal relationship between information and communication technology and foreign direct investment

Roghieh Gholami*, Sang-Yong T. Lee, Almas Heshmati

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

This paper investigates the simultaneous causal relationship between investments in information and communication technology (ICT) and flows of foreign direct investment (FDI), with reference to its implications on economic growth. For the empirical analysis we use data from 23 major countries with heterogeneous economic development for the period 1976-99. Our causality test results suggest that there is a causal relationship from ICT to FDI in developed countries, which means that a higher level of ICT investment leads to an increase inflow of FDI. ICT may contribute to economic growth indirectly by attracting more FDI. Contrarily, we could not find significant causality from ICT to FDI in developing countries. Instead, we have partial evidence of opposite causality relationship: the inflow of FDI causes further increases in ICT investment and production capacity. © United Nations University 2006.

Original languageEnglish
Pages (from-to)43-62
Number of pages20
JournalWorld Economy
Volume29
Issue number1
DOIs
Publication statusPublished - 10 Jan 2006

Keywords

  • investments in information
  • communication technology
  • foreign direct investment
  • economic growth
  • developing countries
  • ICT production capacity

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