Foreign Direct Investment and Digital Transformation of Local Companies: Evidence from Vietnam

Abstract This study examines the relationship between foreign direct investment (FDI) and the digital transformation of local companies in Vietnam, with particular emphasis on the moderating role of absorptive capacity. Using firm-level quantitative data and regression analysis, the findings indicate that greater exposure to foreign-invested enterprises is positively associated with higher levels of digital transformation among domestic firms. However, this effect is conditional on firms’ internal capabilities, especially human capital and learning capacity. The results suggest that FDI can act as a catalyst for digital upgrading, but its benefits are not automatic. Policy implications highlight the need to align investment attraction with enterprise capability development to achieve inclusive digital transformation.