Work

The middle-income trap and foreign direct investment: a mixed-methods approach centered on Mexico and South Korea

Year: 2024

Type: article

Abstract: While scholars extensively study the middle-income trap, gaps persist, particularly regarding foreign direct investment and its role in transitioning from middle- to high-income status. This mixed-methods research examines the relationship between foreign direct investment inflows and escaping the middle-income trap. Utilizing a comparative case study of the automotive industries in Mexico and South Korea during the 1960s to 2000s, alongside logistic regressions, we consistently observe a negative correlation; higher foreign direct investment inflows are associated with a decreased likelihood of escaping the middle-income trap. This confirms the World-Systems Theory’s view of the relationship between foreign direct investment inflows and the middle-income trap. The implications of this study should induce caution on the part of middle-income countries when accepting foreign direct investment in strategic, high-value-adding industries. This study recommends opting for purchasing foreign technology or for joint ventures that ensure technology transfers. This research addresses a critical gap, offering insights into the nuanced dynamics of foreign direct investment’s effects on the transition from middle to high-income status.

Source: Humanities and Social Sciences Communications

DOI: 10.1057/s41599-024-03662-6

Author: Anthony William Donald Anastasi

Institution: Wenzhou Business College

Language: English

Topic: International Business and FDI

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Decent work and economic growth, Industry, innovation and infrastructure, Reduced inequalities

Open Access status: gold

Estimated APC paid: $1,690