Macroeconomic Stability, Foreign Direct Investment, and Entrepreneurship Ecosystems: Evidence for Sustainable Enterprise Development in RIC Economies
DOI:
https://doi.org/10.66635/7n0m8c83Keywords:
Foreign Direct Investment (FDI), Macroeconomic Stability, Entrepreneurship Ecosystems, Sustainable Entrepreneurship, SME Development, RIC Economies, JEL Classification: F21, O11, L26, Q56, O53Abstract
Sustaining inclusive economic development in developing countries involves stable macroeconomic environments capable of attracting long term foreign investment and supporting entrepreneurship driven growth. In addition, capital inflow, foreign direct investment contributes to the development of entrepreneurship ecosystems through technological knowledge transfer, innovation diffusion, management expertise and enhanced opportunities for small and medium enterprises (SME’s) and sustainable businesses enterprises. This study examines the determinants of Foreign Direct Investment (FDI) inflows in Russia, India, and China (RIC) using annual panel data covering the period from 2001 to 2024. The Pooled Mean Group Autoregressive Distributed Lag (PMG-ARDL) approach to estimate both short-term dynamics and long-term equilibrium among the selected countries. Panel unit root test is applied to determine the order of integration of the variables and assess the suitability of the PMG-ARDL framework. The results indicate the long-term relationship exists between FDI inflows and macroeconomic variables. In particular, market size emerges as a significant determinant of FDI, highlighting the importance of sustained economic growth and growing market opportunities in attracting foreign investment. The findings highlight the importance of sustained economic growth along with increasing domestic markets for attracting foreign direct investment inflows. On the other hand, higher real interest rates, inflation and exchange rate appreciation adversely influence FDI through increasing economic uncertainty and decreasing host economy competitiveness. The estimated error correction term indicates a relatively fast adjustment towards long-run equilibrium which also validates the existence of a stable relationship between all of the selected variables. Stable macroeconomic conditions are also considered to provide support for innovation-based entrepreneurship as well as assisting in the growth of SMEs and encouragement sustainable enterprise development within an economy. This study contributes to the entrepreneurship and sustainability literature by indicating that sustaining inclusive economic development in emerging economies depends on stable macroeconomic environments that attract long-term foreign investment and support entrepreneurship-led growth. FDI extends beyond capital inflows by strengthening entrepreneurship ecosystems through knowledge transfer, innovation diffusion, managerial capabilities, and improved growth opportunities for SMEs and sustainable business enterprises.
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