the relationship between good governance and foreign direct investment in east asias knowledge-...
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The relationship between good governance and foreign direct investment in East Asia’s knowledge-
based economic growth
Debnath Sajit Chandra,Doctor with Business Expertise (DBE) Program, Kyushu University;
PhD Candidate, Ritsumeikan Asia Pacific University, Japan.
Dr. A Mani,Professor at Ritsumeikan Asia Pacific University, Japan.
Contents• Introduction• Methodology and data sources• Different approaches of economy• Relationship mechanism among good governance, FDI and KBE in
East Asia• The impact of good governance in promoting KBE in East Asia– Good Governance in East Asia– The Role of good governance in promoting KBE in East Asia– The Current Status of Knowledge-based Economy in East Asia
• Statistical Findings• Conclusion
Introduction• Knowledge-based economy: An economy that creates and
diffuses knowledge and thereby achieves economic growth.
• Different schools of growth theory, whether of the neoclassical or endogenous types, have all recognized the indispensable role of technological progress and its corollary, knowledge, in sustaining the growth process and increasing the level of per capita income.
• Many East Asian economies have shown remarkable success in creating a knowledge-based economy.
• This paper attempts to explain the relationship between good governance and foreign direct investment in East Asia’s knowledge-based economic growth.
Methodology and Data Sources• Methodology
– Qualititative Analysis.– Quantitative Analysis using SPSS software.
• Data Sources– Qualitative Analysis
• Published articles and books
– Quantitative Analysis• Worldwide Governance Indicators, 1996-2007 available at
http://info.worldbank.org/governance/wgi/sc_country.asp• IMD online.• Government Finance Statistics Yearbook 2007.• UNESCO online database (http://stats.uis.unesco.org).• World Development Index Database.• The Conference Board and Groningen Growth and Development Centre, Total Economy
Database, September 2008. Retrieved from http://www.conference-board.org/economics/ on 8th November, 2008.
Different approaches of economyNeoclassical Approach
Knowledge Economy Approach
Industrialization
Knowledge-based Economy
Economic Growth
The Innovation System
Education and Human Resources
Information and Communication
Technology
Economic Incentives and Institutional
Regime
Explains shift from traditional economic system
Does not explain shift from traditional economic system
Market-friendly view
State Interventionist View
Combination of Market-friendly and State Interventionist View
Knowledge-based Economy View
Developmental State Approach
Market-Enhancing Approach
Relationship mechanism among good governance, FDI and KBE in East Asia
Good Governanc
e
Attracts FDI and allows Domestic
Investment
Development of KBE
Infrastructure
KBE
The impact of good governance in promoting KBE in East Asia
–Good Governance in East Asia–The Role of good governance in promoting
KBE in East Asia–The Current Status of Knowledge-based
Economy in East Asia
The impact of good governance in promoting KBE in East Asia
–Good Governance in East Asia–The Role of good governance in promoting
KBE in East Asia–The Current Status of Knowledge-based
Economy in East Asia
• Taiwan’s data is not available.
The impact of good governance in promoting KBE in East Asia
–Good Governance in East Asia–The Role of good governance in promoting
KBE in East Asia–The Current Status of Knowledge-based
Economy in East Asia
Country Rank
Change in Rank
from 1995
Missing Data
KEI KI
Economic Incentives
and Institutional
Regime
The Innovation System
Education and
Human Resources
Information and
Communication Technology
(ICT)
Taiwan 1 2 X 8.67 8.78 8.35 9.24 8.03 9.07
Japan 2 -1 8.53 8.80 7.71 9.15 8.70 8.55
Singapore 3 -1 X 8.41 7.97 9.71 9.56 5.16 9.19
Hong Kong 4 -1 8.18 7.71 9.6 8.63 5.23 9.27
Malaysia 5 0 X 6.16 6.16 6.18 6.82 4.35 7.3
China 7 1 X 4.36 4.48 4.01 5.1 4.06 4.28
Current Status of KBE in East Asia
Statistical FindingsRegulatory
QualityRule of
LawGovernment Effectiveness
Voice & Accountability
Political Stability
Control of Corruption
FDI inflows ** ** ** ** **Public spending on Education
* *
R&D Expenditure
* ** ** ** ** **ICT Expenditure
**
Conclusion
• It is evident that the same countries that have superior good governance have performed better in terms of creating knowledge-based economy.
• This study of selected East Asian Countries indicates a positive relationship between FDI in East Asia’s knowledge-based economic growth.
Thank you for
your attention
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