Do Financial Development, Institutional Quality and Natural Resources Matter the Outward FDI of G7 Countries? A Panel Gravity Model Approach

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

Dear Authors,

 

thank you for the opportunity to read your paper and evaluate your study. It is an interesting paper that investigates the impact of financial development, natural resources, institutional quality, and institutional distance on outward foreign direct investment (FDI) from G7 nations to 45 host emerging countries (ECs) from 2002 to 2021. Results suggest that a well-developed financial system and strong institutions in ECs are crucial for attracting FDI, with institutional quality and distance positively moderating the relationship.

Suggestions for improving the quality of the paper:

1. it is not clear whether the paper speaks about inward or outward FDI as it explains what EC do to attract FDI. Which one is used and why?

2.the theory on FDI goes from the product life cycle theory to OLI paradigm, Dunnings theory, transactional cost theory etc., many of which mention and focus on institutions and institutional quality as one of the main factor of inward FDI.

3. Hansen (1982) test assesses the suitability of a model by examining whether certain restrictions are justified. The resulting p-values are ideally within the range of 0.1 to 0.3. 

4. In the GMM model, the number of instruments should be smaller than the number of groups. Please indicate that in the tables. Also state whether you have used year dummies for all period or not and list the instruments for each equation and explain how they relate to your research.

5. As part of the robustness check please take the smaller sample of countries from the existing sample and check the consistency of the results. 

 

 

remove the focus from sustainable development in the Introduction since you are not discussing sustainable development.

Comments on the Quality of English Language

None. The comment relate to above stated.

Author Response

Please see the attachement

Author Response File: Author Response.pdf

Reviewer 2 Report

Comments and Suggestions for Authors

Alternative measures of IQ such as VDEM could be used

Theo ethical mechanisms could b specified more explicitly 

 

Good paper overall

Author Response

Please see the attachement

Author Response File: Author Response.pdf

Reviewer 3 Report

Comments and Suggestions for Authors

I read the manuscript with great interest. The question on how to attract more FDIs is a relevant one for several countries that aim for faster economic growth and improved welfare.

I have some questions however. The aim is to study the FDI flows between the main economic powers (G7) and emerging economies. However, the countries included in the ECs in this study include several countries that are not commonly considered as emerging but rather developed economies (e.g. the Nordic countries; Table A1). Of course that choice increases the range of the explanatory variable values, but at the same time it can obscure the actual effect on the emerging economies that might have some unique features. I suggest you to refine the list of nations included in ECs and update the estimations, results and discussion accordingly. Alternatively, you can modify the paper so that it is more general, without the ECs focus.

Another issue is the formulation of the empirical model. E.g. equations 2-4 only differ by one explanatory variable, the set of variables FD, FUEL and ORME making the difference. I didn't find a good justification for this decision in the paper. At the same time, the decision to estimate the model as a system of equations is not explained either.

Also I am not sure about the justification for taking the logarithms (lines 320-322). What does that have to do with dimensions?

The equations have the FDI as the dependent variable, but the tables have a different set of variables as columns. There is no good explanation for that either. Table 1 has FD as an explanatory variable in each column, although that should be only in some of the equations of 5-7.

I am suggesting for explaining and revising these points before I can consider proceeding further with the review.

Comments on the Quality of English Language

The overall quality is good. However, the paper would be improved from a serious attempt to make the writing simpler and concise.

A minor detail: line 583 'Fourth' should be 'Fifth'.

Author Response

Please see the attachement

Author Response File: Author Response.pdf

Round 2

Reviewer 3 Report

Comments and Suggestions for Authors

Thank you for considering my suggestions for improving the paper. I consider it now fit for publication.