Analysis of the impact of the provincial innovation index (PII) on attracting foreign direct investment: A case study of the top 20 provinces in vietnam by total registered foreign direct investment (FDI) capital

Abstract

The study "Analysis of the Impact of the Provincial Innovation Index (PII) on Attracting Foreign Direct Investment: A Case Study of the Top 20 Provinces in Vietnam by Total Registered Foreign direct investment (FDI) capital" investigates the relationship between provincial-level innovation capacity, as measured by the PII, and foreign direct investment (FDI) attraction. Amid increasing global competition and Vietnam’s efforts to foster innovation-led growth, this research explores the significance of PII as a critical tool in evaluating local competitiveness and guiding policy-making to attract foreign investments. Using a quantitative approach, the study employs cross-sectional data from 2023 for the top 20 provinces in Vietnam ranked by total registered FDI capital. The research applies Ordinary Least Squares (OLS) regression to examine the influence of PII components on FDI attraction. Results reveal that the output pillar related to knowledge, creativity, and technological products significantly impacts FDI attraction. This finding underscores the importance of fostering innovation ecosystems to enhance the appeal of provinces for foreign investors. Conversely, the socio-economic impact pillar demonstrates an insignificant relationship with FDI, suggesting the need for further refinement in measuring and leveraging these factors. Policy recommendations include optimizing PII indicators, particularly those related to technological innovation, and enhancing the development of input pillars like human capital and market sophistication. Additionally, fostering collaboration between provincial governments and private enterprises is essential for building sustainable innovation ecosystems. The study provides valuable insights for policymakers, researchers, and investors seeking to enhance provincial competitiveness and attract sustainable FDI flows. Overall, this research highlights the strategic role of innovation in shaping Vietnam’s provincial competitiveness and underscores the importance of data-driven approaches in formulating investment-attraction policies. By leveraging insights from the PII, provinces can better align their development strategies with global trends, thereby sustaining economic growth and innovation performance.