Impact of Digital Economy Development on Foreign Direct Investment Effectiveness and Heterogeneity Analysis

Purpose/Significance The development of digital economy has given rise to new industries, new business models and new modes, and also has an important impact on the direction of international investment flows. Exploring the impact of the digital economy on foreign direct investment（FDI） plays an important role in improving the quality of foreign investment utilization and accelerating the construction of a new double-cycle development pattern. Design/Methodology Based on the panel data of 241 prefecture-level cities across China from 2011～2018, this paper measures the level of digital economy development and empirically tests the effect and heterogeneity of digital economy development on foreign direct investment inflows using principal component analysis. Conclusions/FindingsDigital economy development significantly enhances FDI inflows and passes a series of robustness tests. The FDI promotion effect of digital economy development is more significant in the eastern region and large-scale cities. The results of heterogeneity analysis show that the improvement of human capital level and information infrastructure construction can significantly enhance the FDI promotion effect of digital economy development. This paper has important reference value for releasing the dividend of digital economy development and promoting higher level of opening up to the outside world.