Impact of patent system, transportation and ICT infrastructure on FDI inflows of 43 developing countries in the era of 4.0 industrial revolution.

Abstract

This research study investigates the dynamics of foreign direct investment (FDI) attraction, particularly focusing on the roles of transportation infrastructure, information and communication technology (ICT), and the patent system in 43 developing countries. Employing an advanced econometric methodologies - the Two-Step System Generalized Method of Moments (S-GMM) model, we aim to explore how the impact of these key variables on FDI attraction has evolved over time (2000-2021), specifically during the 4.0 industrial revolution and the COVID-19 pandemic. Our empirical findings reveal a notable positive correlation between transportation infrastructure and FDI inflows. However, within the context of the Fourth Industrial Revolution, the once robust influence of transportation infrastructure shows signs of attenuation, possibly due to the growing prominence of virtual collaboration and efficient supply chain management. Interestingly, the impact of the patent system on FDI attractiveness has strengthened during this 4.0 era, highlighting the increasing importance of intellectual property rights. Surprisingly, while the influence of ICT infrastructure on FDI inflows remains positive, its magnitude appears to have moderated compared to the previous stage, reflecting the transformative impact of advanced digital technologies. In light of our findings, we propose targeted strategies for enhancing FDI attractiveness in developing nations: (1) prioritize technology-driven infrastructure, emphasizing digital literacy and innovation; (2) enact patent system reforms to safeguard intellectual property; and (3) enhance resilient transportation infrastructure aligned with digital advancements.