The nexus between inward foreign direct investment and trade in creative products: empirical evidence from a developing economy

This study capitalises on the extended gravity model to empirically examine the effects of inward foreign direct investment (FDI), cultural distance, and other relevant elements on the creative goods exports from Vietnam, a developing economy to foreign markets. We find a positive effect of economic size and high-income status on Vietnam's creative exports at the aggregate level and nearly all subsectors. At the aggregate level, we detect that FDI advantageously affects Vietnam's creative exports, while at the subsector level, a positive effect was found only in the design sector. In the design sector, FDI positively influences the exports of architecture, glassware, interiors, and jewellery. At the aggregate level, cultural distance, trade openness, and logistics performance positively affect creative exports. We find heterogeneous effects of the considered factors on the exports of creative subsectors and subsectors of the design industry. We find that the number of unexploited markets for creative exports outweighs that of overtraded markets. This study suggests that Vietnam should enhance the attraction of FDI flows and apply a dynamic approach to utilise the cultural differences, subsectors of the creative industry, and export markets. Additionally, Vietnam should improve its logistics performance and participation in new-generation trade agreements.