Exploring the nexus between dimensions of spatial structure and foreign direct investment: A case study of Vietnam

Abstract

The spatial structure plays a crucial role in the development and management of the economy, rendering it an object of perennial fascination among scholars and policymakers. However, extant inquiries have ignored the intricate interplay between spatial structure and the capacity to elicit foreign direct investment (FDI) inflows. To shed light on this neglected nexus, the present investigation adopts Vietnam as a compelling case study. Leveraging the two-stage least squares regression method (TSLS) coupled with instrumental variables, it scrutinizes the multifarious impacts stemming from distinct facets of spatial structure: on FDI attractiveness. The empirical findings unveil a salient phenomenon: the presence of urbanization externalities, as epitomized by the urban population, engenders a favorable effect on the allure of FDI in given areas. Conversely, the dispersion of population under the decentralized model proves inimical to FDI prospects. Furthermore, the degree of polycentricity within the spatial structure exhibits a discernible propensity to impede the capacity for attracting FDI, with the magnitude of this influence contingent upon the size of the urban population. These findings provide valuable insights for policy formulation to enhance the appeal of FDI within regional contexts.