Communications infrastructure and traditional determinants of inward foreign investment

Abstract

PurposeThis paper seeks to examine the effects of communications infrastructure and other traditionally‐investigated, market‐related factors on net investment inflows into developed versus emerging markets.Design/methodology/approachHypotheses are developed and tested empirically using auto‐regression analysis. Data are used from 38 countries (19 developing and 19 developed) over a ten‐year period (1995‐2004).FindingsFindings are consistent with the view that research models of the drivers of investment inflows should consider markets' levels of economic development, different time frames, and macro‐economic changes in the global market.Research limitations/implicationsCommunications infrastructure influences a country's ability to attract foreign investment. Extrapolation of the results to other places and times should be done with caution.Practical implicationsManagers should carefully examine the information and communications technology (ICT) infrastructure before investing in foreign countries to determine suitability to supporting achievement of company objectives. Policy makers that wish to attract foreign investment should strengthen country ICT capacity and, especially for emerging economies, complementary capabilities and telecommunications utilization.Originality/valueThe research highlights the importance of communications infrastructure for attracting inward foreign investment and suggests that technological infrastructure and human utilization of communications impact investment inflows, but only during a certain time frame in the development process of market economies.