The Interactive Effect of Foreign Direct Investment and Human Capital on Export Diversification in Selected Member Countries of the Organization of Islamic Cooperation
Keywords:
Foreign direct investment, human capital, export diversification, Generalized Method of Moments (GMM)Abstract
The present study examines the interactive effect of foreign direct investment and human capital on export diversification in 19 member countries of the Organization of Islamic Cooperation over the period 2010–2022, using the Generalized Method of Moments (GMM) approach. The findings indicate that export diversification is a path-dependent and self-reinforcing process, meaning that previous successes in expanding the export basket enhance future achievements. Moreover, foreign direct investment alone is not a sufficient condition for export diversification; rather, its positive impact depends on the existence of an adequate level of human capital. Skilled labor, as a platform for absorbing and localizing transferred technologies, multiplies the effectiveness of foreign capital. Finally, financial development, efficient infrastructure, and strong institutions act as facilitating factors that provide the necessary conditions for the full realization of this synergy. Accordingly, integrated and coordinated policymaking in the areas of targeted attraction of foreign capital, investment in education and skill development, institutional strengthening, and infrastructure development constitutes a key strategy for moving away from single-product economies and achieving sustainable economic diversification in the countries under study.
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Copyright (c) 2025 Khaldoon Abdullah Khalaf (Author); Saeed Daei Karimzadeh; Abdul Rezzaq Hamad Hussein, Sara Ghobadi (Author)
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