Inflow determinants of foreign direct investment

This article examines the determinants of the foreign direct investment (FDI) inflow to the Lao People's Democratic Republic (Lao PDR). Namely, the study develops a static and dynamic gravity model that captures said determinants over the 1995 to 2015 time period. The results reveal that market size, trade openness, inflation rate, labor cost and exchange rate are primary FDI inflow attractants. And every year's FDI inflow is itself a crucial precursor of next year's foreign investor decision-making, while distance and border sharing among countries do not seem to support FDI inflow. Despite the study's qualifications, exporting is a vital business component that affects a manufacturing firm's working capital, with multiple implications for business practice and research.