Do Business Conditions Drive FDI Inflows? A Decomposition Analysis Using B-READY Indicators

Authors

  • Irsan Hardi Economic Modeling and Data Analytics Unit, Graha Primera Saintifika, Aceh Besar 23371, Indonesia
  • Mustafa Necati Çoban Department of Economics, Faculty of Economics and Administrative Sciences, Tokat Gaziosmanpaşa University, Tokat 60250, Türkiye
  • Ar Razy Ridha Maulana Statistics Aceh Province, Banda Aceh 23121, Indonesia
  • Ghalieb Mutig Idroes Energy and Green Economics Unit, Graha Primera Saintifika, Aceh Besar 23371, Indonesia
  • Ulfa Mardayanti Bank Mustaqim Aceh, Banda Aceh 23245, Indonesia

DOI:

https://doi.org/10.60084/ijma.v3i1.303

Keywords:

Business conditions, Business ready, B-READY, FDI inflow, GDP, Robust least squares

Abstract

Foreign direct investment (FDI) is essential for economic development and business sustainability, and understanding the business conditions that attract it remains a key policy concern. This study adopts a decomposition approach by examining the impact of various B-READY indicators on FDI inflows in separate models, using cross-sectional data from 45 countries. To ensure methodological rigor, it applies three Robust Least Squares (RLS) estimation techniques: M-type, S-type, and MM-type. The findings reveal that six out of ten B-READY indicators exert a positive and statistically significant influence on FDI inflows. The significant B-READY indicators, such as business insolvency, dispute resolution, international trade, labor, market competition, and taxation, highlight critical factors that businesses consider when entering or expanding in foreign markets. These insights offer valuable guidance and practical implications not only for policymakers seeking to strengthen national investment environments, but also for businesses evaluating market readiness and investment risks in foreign economies.

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2025-05-30

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Hardi, I., Çoban, M. N., Maulana, A. R. R., Idroes, G. M., & Mardayanti, U. (2025). Do Business Conditions Drive FDI Inflows? A Decomposition Analysis Using B-READY Indicators. Indatu Journal of Management and Accounting, 3(1), 1–16. https://doi.org/10.60084/ijma.v3i1.303

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Vol. 3 No. 1 (2025): June 2025

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