TITLE:
How Do Contributing Factors of FDI Inflows Relate to the Importance of Local Supplier Base? A Case for Bangladesh
AUTHORS:
Amitavo Bairagi
KEYWORDS:
Foreign Direct Investment, Local Supplier Network, Infrastructure Quality, Labor Costs, Ease of Doing Business, Dunning’s Eclectic Paradigm
JOURNAL NAME:
Open Journal of Business and Management,
Vol.13 No.1,
January
13,
2025
ABSTRACT: This study investigates the intricate relationship between key determinants of Foreign Direct Investment (FDI) inflows and the role of a robust local supplier network in enhancing Bangladesh’s attractiveness as an investment destination. Positioned within the context of Bangladesh’s economy, the research employs econometric multiple regression model analysis and thematic analysis anchored in Dunning’s Eclectic Paradigm (OLI Model) to explore how infrastructure quality, labour costs, and ease of doing business contribute to FDI decisions while also fostering local supplier networks critical for cost efficiencies, operational resilience and global supply chain integration. Empirical findings reveal that a well-developed local supplier base significantly increases FDI inflows by enabling technology transfer and skill development, particularly in key sectors like, textiles and ICT. Key findings also reveal that a 1% increase in local supplier growth correlates with a $120 million rise in FDI inflows, infrastructure improvements contribute $90 million per unit increase, and a one-point enhancement in ease of doing business adds $100 million. Additionally, the study highlights the importance of infrastructure development and regulatory reforms in sustaining FDI inflows and promoting economic diversification into emerging industries like, renewable energy and advanced manufacturing. These insights offer actionable recommendations for policymakers to create a resilient, competitive, and sustainable FDI ecosystem in Bangladesh.