Internet Penetration, FDI Inflows, and Economic Growth:Evidence from ASEAN Countries

Laura Stevenson

doi:10.64391/ijssat.v2i1.004

Authors

Laura Stevenson School of Humanities and Social Sciences, University of Akureyri Author

DOI:

https://doi.org/10.64391/ijssat.v2i1.004

Keywords:

internet penetration, FDI, economic growth, ASEAN, panel data, endogenous growth theory

Abstract

This study examines the impact of internet penetration and foreign direct investment (FDI) inflows on economic growth across ten ASEAN member countries over the period 2010–2022. Grounded in endogenous growth theory and the technology-diffusion framework, the study employs a panel data regression approach with fixed effects and random effects estimations, with model selection based on the Hausman test. Data were sourced from the World Bank World Development Indicators (WDI) database. The dependent variable is GDP growth rate, while the key independent variables are internet penetration rate and FDI net inflows as a percentage of GDP. Control variables include inflation rate, gross capital formation, and trade openness. The Hausman test result (χ² = 18.47, p = 0.0024) supports the fixed effects model as the preferred specification. Empirical results indicate that both internet penetration (β = 0.058, p < 0.05) and FDI inflows (β = 0.211, p < 0.10) are statistically significant and positively associated with economic growth. Inflation exerts a significant negative effect. The findings underscore the policy relevance of digital infrastructure investment and investment-friendly regulatory environments as twin pillars of sustained regional economic development.

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