Attracting Foreign Direct Investment in the Digital Era: An Analysis of the Role of Digital Government

With the importance of FDI inflows as a source of capital, technology for the development of the host economy, could get more advantageous by more inflows of FDI. Foreign Direct Investment has always been influenced by factors such as political stability and the regulatory environment. In the modern era, digital governance and the quality of e-government have emerged as important indicators for measuring a country's readiness to adopt technologies and technology-related investments. This study examines the determinants of foreign direct investment across a sample of 30 countries over the period 2010–2023. To ensure robust and reliable estimates, the Generalized Method of Moments econometric technique is employed, as it effectively controls for endogeneity, individual effects, and dynamic panel data characteristics. The findings reveal that the quality of e government is the strongest and most significant factor positively influencing FDI inflows in the short run. This underscores the growing importance of transparency, efficiency, and the reduction of bureaucratic barriers through digital tools for international investors. Moreover, political stability also exerts a positive and significant effect on investment flows, highlighting the continuing relevance of institutional security and the mitigation of political risk even in a digitalized environment. Conversely, trade obstacles, consistent with theoretical expectations, demonstrate a deterrent effect on foreign investment. Ultimately, the study concludes that the success of countries in attracting FDI depends on prioritizing the improvement of digital governance quality and investment in e government infrastructure. This should not be viewed as a cost but rather as a strategic investment that creates a competitive advantage for attracting capital in the short term. Nevertheless, achieving this objective also requires a stable political and economic environment to ensure the sustainability of investment flows in the long run.