Determinants Of Foreign Direct Investment In Services For OECD Countries

In the past decade, a majority of world FDI has been flowing into OECD countries and FDI has become the fundamental tool of economic growth and can be widely viewed as a stable source of financing for developing countries. The developing countries’dependence on FDI among total capital inflows, therefore, can often be a good indicator of the robustness of their economies against external shock. In this occasion, this research aims to analyze the determinations of the FDI in the service sector.Currently, OECD COUNTRIES is facing the moving or relocating of multinational manufacturer to other countries, where they can obtain lower labor cost such as Vietnam and India. Thus, as a determinant of FDI, the productivity-adjusted wage rates are essential in terms of having attractive low labor wage rates. However, a higher inflow of FDI into OECD COUNTRIES is likely to increase FDI in Asian countries if the economies are complementary in the context of international production networks established by TNCs, which have been increasingly adopting "systemic globalization" strategies. This is in line with the finding that the level of inward FDI in OECD COUNTRIES is positively related to the levels of inward FDI in eight Asian countries.Besides the four macroeconomic variables tested in this study, there are many conditions for the growth of the economy such as good business environment, good governance, and financial stability of the country. The empirical findings in this study leads to suggestions for related functions to consider how to attract more FDI inflow. There is still a lot of work for OECD COUNTRIES to do to increase its ability to attract more FDI and its ability to maintain FDI. Since there is still a lot of room for investment inflow to OECD COUNTRIES, the efficiency conditions and promotions are really needed to generate interest for investors. Generally, the finding results for OECD COUNTRIES are not the same; GDP (PPP) is concluded to be the most significant determinant for the inflow of FDI.