Foreign capital, digital infrastructure and institutional quality in BRI industrial upgrading: a fuzzy-set analysis of pre- and post-BRI trajectories
Tien Dung Luu, Hoang Minh Tran, Thai Binh NguyenPurpose
Foreign direct investment (FDI) is often promoted as a catalyst for industrial transformation, yet evidence from emerging economies remains highly inconclusive. This study aims to examine the FDI and industrialisation nexus in 23 belt and road initiative (BRI) economies over the period 2010–2020, focusing on how digital infrastructure and institutional quality jointly shape industrialisation outcomes.
Design/methodology/approach
Using fuzzy-set Qualitative Comparative Analysis, the study identifies multiple sufficient configurational pathways through which industrial upgrading may occur, capturing causal complexity, equifinality and asymmetry. Supplementary FDI outflow and intermediate goods trade data are used to construct a heuristic investment development path (IDP)-stage and global value chain (GVC)-positioning classification that situates configurations within BRI economies’ structural hierarchies as an interpretive overlay.
Findings
In the pre-BRI phase (2010–2012), industrialisation is associated with structurally simple, single-pillar indicative pathways in which high FDI or strong institutional quality appears as standalone sufficiency patterns. Digital infrastructure is structurally disconnected from the industrialisation process during this phase. In the post-BRI phase (2013–2020), industrialisation becomes conjunctural: the dominant pathway combines high FDI, high secure digital infrastructure and strong institutions, with two compensatory routes – a high-FDI enclave configuration and a digital leapfrogging pathway – capturing alternative trajectories. Robustness analyses confirm the persistence of the post-BRI core nexus. The structural mapping of configurations onto IDP-stage and GVC-positioning classifications reveals coherent alignment: Stage 3 + semi-peripheral economies cluster in the core nexus; Stage 1–2 peripheral economies cluster in enclave or leapfrogging pathways.
Originality/value
This study contributes to the prevailing binary debate on whether FDI promotes or constrains development by demonstrating that its industrial impact is structurally contingent. Using a phase-sensitive configurational analysis of developing BRI economies, it uncovers a regime shift from capital-centred, standalone sufficiency to digitally embedded, conjunctural industrialisation pathways. The findings show that the FDI paradox reflects infrastructural misalignment rather than theoretical contradiction. Industrial transformation in digitally mediated production systems is therefore configuration-intensive, requiring coordinated alignment between foreign capital, digital security capacity and institutional governance.