Unveiling the nexus between foreign direct investment and economic restructuring: evidence from Vietnam's transformative journey

Vu Hiep Hoang, Thi Van Anh Vu, Thi Lan Huong Le, Van Hoa Hoang, Thi Van Hoa Tran and Van Nam Le

International Journal of Economics and Business Research, 2025, vol. 29, issue 11, 52-76

Abstract: This study interrogates the complex dialectical relationship between foreign direct investment (FDI) and structural economic transformation in Vietnam's transitional context. While extant literature explores FDI-growth connections globally, the mechanisms through which FDI catalyses sectoral reallocation remain undertheorised in rapidly industrialising economies. Employing system GMM estimation on provincial panel data (201-2020), the epistemic trajectory reveals FDI's significant positive impact on economic restructuring - intensified by human capital development, trade openness, and institutional quality. The hermeneutic analysis uncovers a critical threshold effect, demonstrating FDI's transformative potential amplifies once inflows reach 18.5% of provincial GDP. Furthermore, substantial regional heterogeneity emerges, with North and South regions exhibiting stronger FDI-restructuring nexuses than the Central region, suggesting geographical and historical development pathways significantly moderate outcomes. This transdisciplinary scholarship contributes a sophisticated conceptual framework for understanding FDI's role in structural transformation across diverse institutional contexts.

Keywords: foreign direct investment; FDI; economic restructuring; emerging market; panel data; Vietnam; threshold dynamic panel; regional heterogeneity. (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijecbr:v:29:y:2025:i:11:p:52-76

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