Tangible and Intangible Determinants of FDI and FPI Inflows: Evidence from BRICS Countries

Sally Huni, Athenia Bongani Sibindi () and Patricia Lindelwa Makoni
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Sally Huni: Department of Finance Risk Management and Banking, University of South Africa (UNISA), P.O. Box 392, Pretoria 0003, South Africa
Athenia Bongani Sibindi: Department of Finance Risk Management and Banking, University of South Africa (UNISA), P.O. Box 392, Pretoria 0003, South Africa
Patricia Lindelwa Makoni: Department of Finance Risk Management and Banking, University of South Africa (UNISA), P.O. Box 392, Pretoria 0003, South Africa

Economies, 2025, vol. 13, issue 12, 1-23

Abstract: While extensive research has explored the determinants of foreign direct investment (FDI) and foreign portfolio investment (FPI) in BRICS nations, there remains a notable gap in understanding the influence of intangible factors, particularly soft power and nation branding. Historically, academic discourse has underemphasized the role of nation branding as a crucial emotional and perceptual component in investment decision-making processes. Consequently, governments in BRICS countries must enhance their national branding efforts to attract both capital and portfolio investment flows. The principal aim of this study was to jointly analyse the tangible and intangible determinants influencing FDI and FPI in BRICS from 1994 to 2024. Employing advanced econometric techniques, specifically the Autoregressive Distributed Lag (ARDL) bounds testing approach for cointegration and Vector Error Correction Models (VECM) for estimation. This study makes a unique contribution to existing literature by examining the nexus between nation branding, FDI and FPI, thereby introducing a novel perspective on the factors driving investment in the BRICS context with an emphasis on non-tangible determinants. The findings indicate that nation branding, along with exchange rate stability, property rights, and financial market development, are significant positive determinants of FPI in these countries. Conversely, capital openness demonstrated a negative relationship with FPI. Moreover, the positive impact of nation branding on FDI within BRICS nations was reaffirmed. This study substantiates the critical role of nation branding as a pivotal driver for both FDI and FPI, emphasising its strategic importance in the economic landscape of BRICS countries.

Keywords: nation branding; financial market development; infrastructure availability; determinants; natural resource endowment; country of origin (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2025
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