Multilevel analysis of macroeconomic and institutional determinants of FDI in Newly Industrialized Countries
Purpose — This study empirically examines how macroeconomic and institutional factors influence Foreign Direct Investment (FDI) flows in Newly Industrialised Countries (NICs), with particular emphasis on structural backwardness among NICs.Method — The analysis uses a Hierarchical Linear Modelling (HLM) approach based on multilevel panel data for 2013–2024. We tested the model in stages using the Null Model, Random Intercept Model, and Random Slope Model.Findings — The Null Model yields that cross-country differences, rather than temporal fluctuations, drive most of the variation in FDI across NICs. Graphical analysis confirms this cross-country heterogeneity, showing that institutional capacity and macroeconomic strength explain most of the variation in FDI across countries. The Random Slope Model further shows that GDP has a positive and significant effect on FDI, while Political Stability has a significant negative effect. Trade Openness, Government Effectiveness, and Voice and Accountability are not statistically significant, indicating that macroeconomic factors remain the dominant drivers of FDI.Implication — These findings emphasise the importance of strengthening economic foundations and institutional flexibility in the design of foreign investment policies in NICS countries.Originality — The main contribution of this research lies in its use of random-slope models of Voice and Accountability (VA) models within the HLM framework, enabling a deeper examination of institutional dynamics across NICs.
Authors
- Agus Salim (ORCID: https://orcid.org/0009-0000-8360-5299)
- Uswatun Khasanah (ORCID: https://orcid.org/0000-0002-6707-3496)
- Wing‐Keung Wong (ORCID: https://orcid.org/0000-0001-6755-572X)
- Isabel Viegas Vieira (ORCID: https://orcid.org/0000-0002-2983-7555)
- Suripto Suripto (ORCID: https://orcid.org/0000-0001-8977-0762)
- Mahrus Lutfi Adi Kurniawan (ORCID: https://orcid.org/0000-0002-9329-6386)
- Azkal Azkiya Athfal
Institutions
- Asia University (TW)
- Universitas Gadjah Mada (ID)
- Universitas Ahmad Dahlan (ID)
- Centro de Estudos Organizacionais e Sociais (PT)
- Polytechnic Institute of Porto (PT)
Publication Details
- Journal
- Economic Journal of Emerging Markets
- Published
- 2026-10-29
- DOI
- https://doi.org/10.20885/ejem.vol18.iss2.art3
- Primary Topic
- International Business and FDI
- Type
- article
- Field-Weighted Citation Impact
- 0.00
Funders
- Universitas Ahmad Dahlan