DIGITAL TRANSFORMATION AS A LOCATION-SPECIFIC ADVANTAGE FOR FOREIGN DIRECT INVESTMENT: A SYSTEMATIC EVIDENCE REVIEW
DOI:
https://doi.org/10.46827/ejefr.v10i6.2311Nyckelord:
digital transformation, foreign direct investment, digital infrastructure, location advantage, OLI paradigm, spatial spilloversAbstract
Digital transformation is increasingly treated as a determinant of international investment attractiveness, yet the evidence remains conceptually and methodologically fragmented. This study systematically synthesizes the empirical and theoretical literature linking digital capability to foreign direct investment (FDI), with particular attention to location advantage, measurement, causal identification, subnational heterogeneity, and spatial dependence. The review distinguishes four dimensions of digital capability—basic connectivity, digital government, productive digital adoption, and multidimensional digital transformation—and organizes the evidence around the ownership-location-internalization (OLI) paradigm. The final analytical corpus combines direct inward-FDI studies with complementary evidence on subnational institutions, reverse causality, and spatial econometric foundations. The synthesis shows that the modal empirical result is positive, but the effect is conditional rather than universal. Digital capability can lower information and transaction costs, improve government-business interaction, strengthen innovation and skills, and support network coordination; however, effects vary by development level, institutional quality, digital maturity, and FDI outcome. Recent studies also document nonlinearity and heterogeneous effects, while reverse-causality evidence indicates that FDI can itself accelerate digital adoption. The review therefore argues that digital transformation is best understood as a conditional, cross-cutting, location-specific advantage that augments rather than replaces traditional determinants of FDI. The main research frontier lies in subnational analysis, richer FDI outcome measurement, explicit treatment of endogeneity, and spatial models capable of separating local from regional spillover effects. These gaps are especially relevant for emerging economies such as Vietnam, where digital capability and FDI are unevenly distributed across provinces.
JEL: F21, F23, O33, R11, C23
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