The Digital Economy in the Context of Foreign Direct Investment Flows

The Digital Economy in the Context of Foreign Direct Investment Flows

Aneta Bobenič Hintošová (University of Economics in Bratislava, Slovakia)
DOI: 10.4018/978-1-7998-4390-0.ch011
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Abstract

The main objective of the chapter is to provide a comprehensive overview of the development of the digital economy in the context of foreign direct investment flows, especially from the European Union member states point of view. First, the term and conceptualization of the digital economy is introduced, followed by an overview of theoretical background and empirical findings related to the role of foreign direct investment in the digital transformation of the economy. In this regard, the nature, position, and international footprint of digital multinational enterprises are also analyzed. The level of the digital economy and society development in the context of foreign direct investment flows is evaluated specifically in the conditions of the European Union member states. The conclusion summarizes the main partial findings, evaluates them in a mutual context, and brings implications for future research.
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Concept Of The Digital Economy

The concept of the digital economy is associated with the work by Tapscott (1996) titled The Digital Economy: Promise and Peril in the Age of Networked Intelligence. It was pointed out that since the old economy was typical for physical information now, in the new (so-called digital) economy, information in all its forms becomes digital, i.e. reduced to bits stored in computers and racing at the speed of light across networks. Thus, central point of this notion of the digital economy is networking of technology as well as networking of humans through technology.

Further definitions highlighted the important role of Internet (e.g. Lane, 1999) through which electronic business and electronic commerce is stimulated (e.g. Mesenbourg, 2001). In this regard, the term Internet Economy or Web Economy is also used to describe the New Economy. The development of Internet enabled the expansion of information- and knowledge- based assets connected with digital transformation of all sectors of the economy. Further definitions dealing with technological aspects pointed out digitized innovations, such as mobile services, cloud computing, big data and artificial intelligence that has boosted changes significantly and provided us extraordinary services and welfare never anticipated before (Watanabe et al., 2018b).

Key Terms in this Chapter

FDI Performance Index: The ratio of a country's share in global FDI to its share in global GDP.

Digital Multinational Enterprise: Enterprises that perform activities primarily based on Internet and/ or provide the enabling infrastructure supporting the Internet in more than one country.

Inward FDI: Net inflows of foreign direct investment made by a foreign entity in business interests in another (reporting) country, in the form of either establishing business operations or acquiring business assets or property rights in the other (reporting) country.

Outward FDI: Net outflows of foreign direct investment made by a domestic entity (i.e., from reporting country) in business interests in another (foreign) country, in the form of either establishing business operations or acquiring business assets or property rights in the other (foreign) country.

Digital Economy: Consequence of qualitative transformation of wide range of economic relations that are based on intensive use of information and communication technologies.

Lightness Indicator: Indicates how many times higher share of foreign sales is generated by multinational enterprise by given share of foreign assets.

Visegrad Countries: A cultural and political alliance of four Central European countries, namely the Czech Republic, Hungary, Poland, and Slovakia.

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