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The effects of large-scale sport events on foreign direct investment inflows: the results of empirical estimation

https://doi.org/10.24833/2071-8160-2019-6-69-167-187

Abstract

The expediency of hosting large-scale sport events (LSE), such as the Summer and Winter Olympic Games, FIFA World Cup and EUFA European Championship, is a matter of public and scientific discussion. The main argument against hosting large-scale sport events is the substantial direct financial losses for an organizing country in most cases. Moreover, local residents often oppose hosting major sport events because of price increase and different inconveniences in their everyday life. At the same time the effects of hosting large-scale events have long-term nature and go beyond direct financial benefits. One of the difficulties in estimating the effects of LSE is that they are hard to measure.

The literature review shows the deficit of research on how large-scale events influence the foreign direct investment inflows in the hosting country. In contrast to numerous papers on LSE influence on economic growth, foreign trade, international tourist flows, the authors found only one article devoted to LSE influence on FDI inflows. The present paper analyzes the influence of major sport events on foreign direct investment flows to the hosting country. The estimated database comprises data for 195 countries for the period of 1970–2018, 24 out of which hosted or will host 48 major sport events. The regression analysis indicates that LSE induce significant influence on foreign direct investment flows in the hosting economy. Comparing several models, we show that the most reliable is the model where hosting LSE positively influence on FDI inflows within the period starting 8 years before and ending 4 years after the event. We explain the result by the following. Firstly, fostering economic growth due to hosting LSE serves as a catalyst of foreign direct investment inflows. Secondly, LSE improves image of the hosting country abroad that positively affects the attractiveness of the country to foreign investors. Thirdly, the growing openness of the economy due to LSE (expressed for example in growth of international trade) positively affects the FDI inflows.

The authors declare the absence of conflict of interests.

About the Authors

I. M. Drapkin
Ural Federal University named after the first President of Russia B.N. Yeltsin
Russian Federation

Igor’ M. Drapkin – doctor of economics

19, Mira Ave., Yekaterinburg, 620002

professor at the department of International economics and management



S. A. Lukyanov
State University of Management; St. Petersburg State University
Russian Federation

Sergey A. Lukyanov – doctor of economics, professor of the Russian Academy of Science

99, Ryazansky Prospect, Moscow, 109542

head of the department of Economic theory

7–9, University embankment, Saint-Petersburg, 199034,

professor at the department of international economics



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Drapkin I.M., Lukyanov S.A. The effects of large-scale sport events on foreign direct investment inflows: the results of empirical estimation. MGIMO Review of International Relations. 2019;12(6):167-187. (In Russ.) https://doi.org/10.24833/2071-8160-2019-6-69-167-187

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