Volume 64, Issue 3 e70010
RESEARCH ARTICLE

Transportation Infrastructure Investments and FDI Inflows: Evidence From a 15-Year Panel Data Analysis

Wenyi Kuang

Corresponding Author

Wenyi Kuang

Silberman College of Business, Fairleigh Dickinson University, Teaneck, New Jersey, USA

Correspondence:

Wenyi Kuang ([email protected])

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Yemisi Bolumole

Yemisi Bolumole

Haslam College of Business, University of Tennessee, Knoxville, Tennessee, USA

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Judith Whipple

Judith Whipple

Broad College of Business, Michigan State University, East Lansing, Michigan, USA

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First published: 15 May 2025

Funding: The authors received no specific funding for this work.

ABSTRACT

This study explores the relationship between transportation infrastructure investments and foreign direct investment (FDI) inflows across 39 OECD countries over 15 years. While previous literature has primarily focused on transportation infrastructure quality, our research shifts the focus to transportation infrastructure investments and their temporal dynamics, grounded in signaling theory. We argue that both the scale and year-over-year (YoY) growth of investments in road and rail infrastructure act as credible signals to foreign investors, reflecting a country's commitment to long-term economic development. Utilizing mixed-effects modeling on panel data, we find that a 1% increase in road infrastructure investment results in a 0.31% increase in FDI inflows, while a similar rise in rail investment corresponds to a 0.29% increase. Notably, a 1% YoY growth in road investment generates a 5.27% rise in FDI, whereas rail investment shows no significant YoY effect unless moderated by country size—larger nations benefit more from incremental rail investment. These findings highlight the importance of sustained and mode-specific infrastructure investment strategies. Our research provides both theoretical contributions by applying signaling theory in a macroeconomic context and practical implications for policymakers aiming to attract FDI. By distinguishing between the effects of road and rail investments and incorporating dynamic investment trends, this study offers new insights into the role of infrastructure investment as a strategic economic signal.

Conflicts of Interest

The authors declare no conflicts of interest.

Data Availability Statement

The data that support the findings of this study are openly available in OECD database at https://www.oecd.org/en/data.html.

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