Prioritizing Strategies for Attracting Foreign Direct Investment in Venture Capital Funds
Keywords:
Investment Attraction, Foreign Direct Investment (FDI), Legal Framework, Economic and Financial Environment, Venture Capital FundsAbstract
The objective of this study is to identify and prioritize the most influential strategies for attracting foreign direct investment (FDI) in venture capital funds. This applied and descriptive–analytical research was conducted through a mixed-methods design. In the qualitative phase, semi-structured interviews with 15 experts in venture capital, macroeconomics, and foreign investment attraction were carried out to extract key strategic factors. In the quantitative phase, pairwise comparison questionnaires based on the Analytic Hierarchy Process (AHP) were used, and data were analyzed using Expert Choice software. Statistical indicators including Kendall’s coefficient, KMO, and Bartlett’s test were applied to validate the data. The results revealed that the “economic and financial environment” (weight = 0.235) is the most influential determinant of FDI attraction. The “legal and regulatory framework” (0.170) and “public and private institutions” (0.120) ranked second and third, respectively. Exploratory factor analysis yielded four key dimensions—“technology and market,” “institutional framework,” “culture and communication,” and “marketing and challenges”—explaining 81.7% of total variance. The lowest weights were assigned to “investment marketing and promotion” and “global market influence,” indicating their limited effect compared to structural and institutional factors. The findings emphasize that establishing a stable economic environment, strengthening legal frameworks, and enhancing institutional support are fundamental for attracting foreign direct investment into venture capital funds. Additionally, improving technological capacity, innovation ecosystems, and managerial competence plays a complementary role in increasing FDI attractiveness and fostering sustainable development of the venture capital ecosystem.
Downloads
References
Afrifa, G. A., Tingbani, I., Yamoah, F., & Appiah, G. (2020). Innovation input, governance and climate change: Evidence from emerging
countries. Technological Forecasting and Social Change, 161, 120256. https://doi.org/10.1016/j.techfore.2020.120256
Ali, A., & Ahmed, J. (2024). Attracting foreign venture capital investment: The institutions that matter most for emerging economies. Social
Sciences and Market Review, 1(25). https://doi.org/10.69591/ssmr.v1i.25
Alsagr, N., & van Hemmen, S. (2021). The impact of financial development and geopolitical risk on renewable energy consumption: Evidence
from emerging markets. Environmental Science and Pollution Research, 28, 25906-25919. https://doi.org/10.1007/s11356-021-12447
2
Azmi, W., Hassan, M. K., Houston, R., & Karim, M. S. (2021). ESG activities and banking performance: International evidence from emerging
economies.
Journal
of
International
Financial
Markets,
Institutions
and
Money,
70,
101277.
https://doi.org/10.1016/j.intfin.2020.101277
Bah, A. O., Xie, K., & Oji-Okoro, I. (2015). Strategies and determinants of foreign direct investment (FDI) attraction. The International Journal
of Management Science and Business Administration, 1(5), 81-89. https://doi.org/10.18775/ijmsba.1849-5664-5419.2014.15.1007
Bollaert, H., Lopez-de-Silanes, F., & Schwienbacher, A. (2021). Fintech and access to finance. Journal of Corporate Finance, 68, 101941.
https://doi.org/10.1016/j.jcorpfin.2021.101941
Bot Shekan, M. H., Bahrololum, M. M., & Alborzian, G. (2021). Selecting Appropriate Strategies for Financing Innovation in Private Equity
Funds. Journal of Innovation Management, 10(2), 139-168.
Bradley, W. A., Duruflé, G., Hellmann, T. F., & Wilson, K. E. (2019). Cross-border venture capital investments: What is the role of public
policy? Journal of Risk and Financial Management, 12(3), 112. https://doi.org/10.3390/jrfm12030112
Cao, Z., & Shi, X. (2021). A systematic literature review of entrepreneurial ecosystems in advanced and emerging economies. Small Business
Economics, 57, 75-110. https://doi.org/10.1007/s11187-020-00326-y
Chahine, S., Filatotchev, I., Bruton, G. D., & Wright, M. (2021). "Success by association": The impact of venture capital firm reputation trend
on initial public offering valuations. Journal of Management, 47(2), 368-398. https://doi.org/10.1177/0149206319847265
Dana, L. P., Salamzadeh, A., Mortazavi, S., & Hadizadeh, M. (2022). Investigating the impact of international markets and new digital
technologies on business innovation in emerging markets. Sustainability, 14(2), 983. https://doi.org/10.3390/su14020983
Garavand, F. (2025). The Right to Regulate: The Intersection of State Sovereignty and Foreign Investor Rights in Investment Arbitration.
Journal of Legal Research, Online First Articles. https://lawresearchmagazine.sbu.ac.ir/article_106352.html
Gompers, P. A., Gornall, W., Kaplan, S. N., & Strebulaev, I. A. (2020). How do venture capitalists make decisions? Journal of Financial
Economics, 135(1), 169-190. https://doi.org/10.1016/j.jfineco.2019.06.011
Haudi, H., Wijoyo, H., & Cahyono, Y. (2020). Analysis of most influential factors to attract foreign direct investment. Journal of Critical
Reviews, 7(13).
Heiberg, J., Binz, C., & Truffer, B. (2020). The geography of technology legitimation: How multiscalar institutional dynamics matter for path
creation in emerging industries. Economic Geography, 96(5), 470-498. https://doi.org/10.1080/00130095.2020.1842189
Jeong, J., Kim, J., Son, H., & Nam, D. I. (2020). The role of venture capital investment in startups' sustainable growth and performance:
Focusing on absorptive capacity and venture capitalists' reputation. Sustainability, 12(8). https://doi.org/10.3390/su12083333
Kazemi Azam, B. M., Hadian, E., & Hakimi, F. (2013). Identifying and Prioritizing Factors Affecting the Attraction of Foreign Direct Investment
(FDI) Using the TOPSIS Technique. Financial and Economic Policies Quarterly, 1(4), 45-72.
Lerner, J., & Nanda, R. (2020). Venture capital's role in financing innovation: What we know and how much we still need to learn. Journal
of Economic Perspectives, 34(3), 237-261. https://doi.org/10.1257/jep.34.3.237
Moshirian, F., Tian, X., Zhang, B., & Zhang, W. (2021). Stock market liberalization and innovation. Journal of Financial Economics, 139(3),
985-1014. https://doi.org/10.1016/j.jfineco.2020.08.018
Mousa Lar Nasr Abadi, A., & Hashemi Dizaj, A. (2021). Identifying and Prioritizing Factors Affecting the Attraction of Foreign Direct
Investment (FDI) After Sanctions Relief Using the Group AHP Technique (Case Study: Aras Free Zone).
Omri, A., & Hadj, T. B. (2020). Foreign investment and air pollution: Do good governance and technological innovation matter?
Environmental research, 185, 109469. https://doi.org/10.1016/j.envres.2020.109469
Ostadi, A., Bazraei, M., & Karimi, M. (2017). Investigating the Factors Affecting the Attraction of Foreign Direct Investment (FDI) with
Emphasis on Institutional and Structural Variables in Selected OPEC Countries.
Petry, J., Koddenbrock, K., & Nölke, A. (2023). State capitalism and capital markets: Comparing securities exchanges in emerging markets.
Environment and Planning A: Economy and Space, 55(1), 143-164. https://doi.org/10.1177/0308518X211047599
Poon, T. S. C., Wu, C. H., & Liu, M. C. (2024). Developing entrepreneurial ecosystem: A case of unicorns in China and its innovation policy
implications. Asian Journal of Technology Innovation, 32(1), 20-36. https://doi.org/10.1080/19761597.2022.2157849
Pratysto, T. (2025). The Role of Domestic and Foreign Investments in Reducing Unemployment in Asean: A 1999-2023 Panel Ardl Analysis.
Jurnal Ekonomi Kreatif dan Manajemen Bisnis Digital, 3(3), 377-386. https://doi.org/10.55047/jekombital.v3i3.914
Samadinia, I. (2020). Investigating Strategies for Attracting Foreign Direct Investment (FDI).
Sevilla-Bernardo, J., Sanchez-Robles, B., & Herrador-Alcaide, T. C. (2022). Success factors of startups in research literature within the
entrepreneurial ecosystem. Administrative Sciences, 12(3), 102. https://doi.org/10.3390/admsci12030102
Su, D. T., Nguyen, P. C., & Christophe, S. (2019). Impact of foreign direct investment, trade openness and economic institutions on growth
in emerging countries: The case of Vietnam. Journal of International Studies, 12(3). https://doi.org/10.14254/2071-8330.2019/12-
Tavasolinia, A., Jafari Samimi, A., & Abrishami, H. (2024). Sensitivity Analysis of Health Indicators to Inflows of Foreign Direct Investment.
Journal of Econometric Modeling(33), 164-189.
Yang, S., Ma, S., & Lu, J. (2022). Can government venture capital guidance funds promote urban innovation? Evidence from China. Growth
and Change, 53(2), 753-770. https://doi.org/10.1111/grow.12606
Yi, L., Wang, Y., Upadhaya, B., Zhao, S., & Yin, Y. (2021). Knowledge spillover, knowledge management capabilities, and innovation among
returnee entrepreneurial firms in emerging markets: Does entrepreneurial ecosystem matter? Journal of Business Research, 130, 283
Downloads
Published
Submitted
Revised
Accepted
Issue
Section
License
Copyright (c) 2025 Ali Azizabadi (Author); Hamid Reza Vakili Fard (Corresponding author); Zahra Moradi, Mohammad Ali Keramati (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
