The Mediating Role of Institutional Quality in FDI Attractiveness: Evidence from Tay Ninh, Vietnam

This study examines the determinants of Foreign Direct Investment (FDI) attractiveness in Tay Ninh, Vietnam, emphasizing the mediating role of Institutional Quality alongside Investment Incentives and Infrastructure Quality. Employing the endogenous growth model and Investment Climate Framework, the research investigates how policies and infrastructure directly enhance FDI inflows, with Institutional Quality mediating through improved workforce skills. Data from 437 respondents across 250 FDI enterprises were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). Findings indicate that Investment Incentives and Institutional Quality exert the strongest direct effects on FDI attractiveness, followed by Infrastructure Quality. Institutional Quality significantly mediates the relationships between Infrastructure Quality, Investment Incentives, and FDI attractiveness. Despite Tay Ninh’s strategic location near Ho Chi Minh City and the Cambodian border, its limited skilled workforce, with only 14.7% formally trained, poses challenges. The study recommends extending investment incentives, accelerating infrastructure development, and prioritizing workforce training to enhance FDI attractiveness and promote sustainable economic growth. These findings offer policymakers actionable insights to strengthen Tay Ninh’s competitiveness in attracting high-value FDI within Vietnam’s Southern Key Economic Region.