Sustainable FDI in the Digital Economy

Abstract

The shift towards a digital economy should lead to changes in the allocation methods of foreign direct investment (FDI), especially given the reduced need to transfer physical assets. At the same time, the need to understand and examine the sustainability of FDI as a relevant attribute throughout the life cycle of a given investment should be emphasized. The paper seeks to answer the research question whether more sustainable foreign direct investment is attracted in the digital economy. Hence, the paper explores the interlinks between the sustainability attributes of FDI and the development of the digital economy. For this purpose, a cluster analysis under the conditions of the countries of the European Union is conducted. The results of the cluster analysis carried out for the two periods show certain similarities, especially within the Nordic, Visegrad, Balkan, and Baltic groups of countries. The first group mentioned can be characterized by advanced digital development as one of the possible driving forces to attract sustainable FDI. The remaining groups show certain differences in this regard. Based on the results, the paper brings some policy implications towards emphasizing the sustainability attributes of foreign direct investment in the digital economy, especially through the implementation of the concept of sustainable investment promotion policy.