Differential Impacts of Macroeconomic Factors on Outward Foreign Direct Investment : An Analytical Study Across Development Levels of Countries

This study explores the key macroeconomic factors that drive Outward Foreign Direct Investment (OFDI) in both developed and developing countries. Using data from 52 countries, including 23 developed and 29 developing nations, we analyze how market size, trade policies, infrastructure, governance, and technological capabilities influence OFDI decisions. The period of study is 2000-2022. Our methodology involves Principal Component Analysis (PCA) and panel data regression to create composite indices and assess their impact on OFDI flows. The findings highlight significant differences in the determinants of OFDI between developed and developing countries, providing insights into the strategic considerations firms must navigate to succeed internationally. The results suggest that while market size and trade openness are crucial for both groups, factors such as infrastructure and natural resources have varying impacts depending on the country’s development level. These insights can help policymakers and businesses understand the complexities of global investment flows and enhance their strategies for international expansion.