The Role of Foreign Direct Investment (FDI) in Regional Economic Development

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Published: Apr 30, 2026
DOI: https://doi.org/10.69726/ijlssm.v3i2.268
Keywords:
foreign direct investment, regional economic development, spillover effect, technology transfer, downstream

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Bambang Ahmad Indarto
a:1:{s:5:"en_US";s:24:"Universitas Ngudi Waluyo";}

Abstract

This study analyzes the role of foreign direct investment in promoting regional economic development in Indonesia. Using the panel data analysis method for the period 2020-2024, this research examines the impact of FDI on regional economic growth, technology transfer, and employment absorption. The results show that FDI has a significant positive impact on regional economic growth with a coefficient of 0.234. Technology spillover effects have been proven to increase domestic firm productivity by 15.2% in the same industry. FDI also successfully absorbed 650,172 workers in Q3 2024. Manufacturing and downstream sectors became the main growth drivers with a contribution of 21.6% of total investment. West Java dominates FDI absorption, with US$2.5 billion, followed by Central Sulawesi at US$2.1 billion. This study recommends strengthening downstream policies and improving domestic companies' technology absorption capacity to maximize FDI benefits for regional economic development.

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How to Cite
Ahmad Indarto, B. (2026). The Role of Foreign Direct Investment (FDI) in Regional Economic Development. International Journal of Law Social Sciences and Management , 3(2). https://doi.org/10.69726/ijlssm.v3i2.268
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Vol. 3 No. 2 (2026): International Journal of Law Social Sciences and Management
Section
Articles

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