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Received: 2024-02-11 | Accepted: 2024-05-17 | Published: 2024-06-30

Title

Impact of foreign capital inflows on the economy of a host country through lenses of employment

Abstract

The expansion of multinational corporations has a significant impact on such small economies as Lithuania. While structural changes in the economy indicate the shifts in the sectoral composition of employment and production, the transfer from labour-intensive to knowledge-intensive sectors substantially contributes to the economy's growth and, therefore, its economic security. The paper aims to determine the impact of the expansion of Nordic capital companies in different sectors on sectorial employment in Lithuania. The study aims to fill this gap by conducting an empirical analysis to investigate patterns and interactions between MNC expansion and employment. The research applied correlation, the Augmented Dickey–Fuller and Granger causality tests. Further, to evaluate the impact of sectorial FDI on sectorial employment, we have applied the Clark-Fisher three-sector model by classifying sectors into primary, secondary, and tertiary. A particular emphasis was placed on the need to evaluate the effect of the expansion of MNCs in different sectors from the single country on the host economy's sectorial employment. Thus, inward sectorial FDI might have a distinct impact on sectorial employment. Our findings prove that the expansion of Norwegian capital companies in the secondary sector affects employment in the secondary sector. Meanwhile, secondary sector employment affects Danish capital companies' expansion in the secondary sector. Our study integrates the Clarks-Fisher model of structural changes and internationalization theory, which extends and fills the gap in the interaction between these two theories.

Keywords

Lithuania, Nordic countries, multinational corporations (MNCs), foreign capital, FDI, sectorial employment, structural changes, Lithuania

JEL classifications

O10 , O15 , O19

URI

http://jssidoi.org/jesi/article/1208

DOI

DOI 10.9770/jesi.2024.11.4(22)

Pages

352-367

Funding

This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

Šimelytė, Agnė

Vilnius Gediminas Technical University (VILNIUS TECH), Vilnius, Lithuania https://vilniustech.lt

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Čižo, Edmunds

Daugavpils University, Daugavpils, Latvia https://du.lv

Articles by this author in: CrossRef | Google Scholar

Journal title

Entrepreneurship and Sustainability Issues

Volume

Number

Issue date

June 2024

Issue DOI

DOI 10.9770/jesi.2024.11.4

ISSN

ISSN 2345-0282 (online)

Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Article views & downloads

HTML views: 783 | PDF downloads: 368

References

Adegboye, A., & Ighodaro, C. (2021). Decomposing employment growth in selected Sub-Saharan African countries: the roles of structural changes and demographic transition. Central Bank of Nigeria Journal of Applied Statistics, 11(2), 145-179. https://doi.org/10.33429/cjas.11220.6/8