Institutional Regimes, Global Value Chains, and the Sectoral Orientation of FDI: A Comparative Study of China, India, and Brazil?

Abstract

This study investigates the long-term and short-term determinants of sectoral foreign direct investment (FDI) inflows in three major emerging economies: China, India, and Brazil, over the period 2016–2024. Utilizing the Autoregressive Distributed Lag (ARDL) modeling framework, the analysis integrates institutional quality, global value chain (GVC) participation, macroeconomic variables, and trade openness to evaluate their differential effects on FDI dynamics. Panel unit root and bounds cointegration tests confirm the presence of long-run relationships in China and India, while Brazil exhibits weaker and less consistent linkages. The long-term estimations reveal that strong institutions and deeper GVC integration significantly enhance FDI inflows, particularly in China and India. Short-run results also highlight the relevance of macroeconomic stability, especially low inflation and sustained growth. The findings underscore the critical role of tailored institutional reform, strategic GVC positioning, and trade policy in shaping investment attractiveness. This study contributes to the literature by offering a comparative institutional perspective on sectoral FDI behavior in emerging markets and provides actionable insights for policymakers seeking to leverage FDI for sustainable development.