Presenting the foreign direct investment model and economic growth of developing countries with the mediating role of human capital and information and communication technology

One of the most important goals of the countries, especially developing countries, is economic growth and development. One of the sources that can retrieve the lack of capital in the developing countries and lead to economic growth is foreign direct investment. Some evidence shows the human capital plays a mediating role in the impact of foreign direct investment on economic growth. The other important factor that can affect economic growth and the prosperity of countries, is the information and communication technology. Thus, the current research aim is to present a foreign direct investment model and economic growth in developing countries with the mediating role of human capital and information and communication technology.

The study populations are the developing countries between 2000-2018. In this research, the developing countries in three continents of Asia, Africa, and Southern America have been selected. Then, the countries are divided into four different income groups: developing countries with high-income, developing countries with higher than medium income, developing countries with lower than medium income, and developing countries with low-income. Thus, in the end, 27 countries in three continents have been chosen as the statistical sample. The method used in this study is the multi-group modeling approach with the structural models with partial least square (PLS) approach.

The results showed that only in the developing countries with high income, the human capital and information and communication technology have a mediating role on the impact of foreign direct investment on economic growth. Thus in high income countries, foreign direct investment affects human capital by 0.609 and human capital affects economic growth by 0.428. Foreign direct investment affects information and communication technology by 0.482 and information and communication technology by 0.348 affects economic growth. In the other income groups in developing countries, these two variables couldn’t have any impact on foreign direct investment on economic growth as a mediator.

Based on the results, it is recommended for developing countries to implement human capital, information and communication technology in foreign direct investment and increase economic growth by using these factors.