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How to be Smart: Leveraging Digital FDI to Address Risk through Growing Capacity and Competitiveness

Matthew Stephenson (Policy and Community Lead, World Economic Forum)
Lorraine Eden (Texas A&M University, Texas, USA)
Michael Kende (Graduate Institute of International and Development Studies, Geneva)
Fukunari Kimura (Keio University, Tokyo, Japan)
Karl P. Sauvant (Columbia Law School, New York, USA)
Niraja Srinivasan (NERA Economic Consulting, USA)
Lucia Tajoli (Politecnico di Milano, Italy)
James Zhan (Editor-in Chief, World Investment Report & Transnational Corporations)

International Business in Times of Crisis: Tribute Volume to Geoffrey Jones

ISBN: 978-1-80262-164-8, eISBN: 978-1-80262-163-1

Publication date: 14 March 2022

Abstract

Rapid digital transformation underway represents both a risk and an opportunity for both policymakers and firms. This can address the risk and seize the opportunity by leveraging FDI to grow digital capabilities and competitiveness through a three-part strategy. First, launching Digital FDI enabling projects (DEPs) to create “digital friendly” investment climates through enabling policies, regulations, and measures. Second, using a “SMART” test as a heuristic before a full-fledged DEP is launched, which benchmarks their economy’s digital Skills, Market functioning, Access through connectivity, Restrictions, and Trust, and provides tools to tackle limiting factors. Third, reviewing FDI trends in six sectors that are important to grow the digital economy (two of which are proposed as essential, namely Communications and Software & IT services), with graphical evidence that can guide policymakers to prioritize policy reforms and investment promotion where they are relatively weak. Throughout, particular attention should be paid to growing the digital capacity of small and medium-sized enterprises (SMEs). A Sustainable Technology Board – modeled after the Financial Stability Board but oriented to cooperation over new technologies – could further help address techno-competition and other concerns over Digital FDI.

Keywords

Citation

Stephenson, M., Eden, L., Kende, M., Kimura, F., Sauvant, K.P., Srinivasan, N., Tajoli, L. and Zhan, J. (2022), "How to be Smart: Leveraging Digital FDI to Address Risk through Growing Capacity and Competitiveness", van Tulder, R., Verbeke, A., Piscitello, L. and Puck, J. (Ed.) International Business in Times of Crisis: Tribute Volume to Geoffrey Jones (Progress in International Business Research, Vol. 16), Emerald Publishing Limited, Bingley, pp. 193-251. https://doi.org/10.1108/S1745-886220220000016012

Publisher

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Emerald Publishing Limited

Copyright © 2022 Matthew Stephenson, Lorraine Eden, Michael Kende, Fukunari Kimura, Karl P. Sauvant, Niraja Srinivasan, Lucia Tajoli and James Zhan