This paper contends that countries seeking to bridge the digital divide with developed countries need to consider e-commerce participation in conjunction with infrastructural issues, including both information and communication technologies [ICT], and its links to foreign direct investment [FDI]. It is argued that the likely impact of e-commerce for any individual country is closely tied to the macro environmental constraints that also condition FDI in that country. Failure to address these constraints can act as a barrier for inflows of FDI and thus restrain e-commerce participation. Following elaboration of the importance of ICT infrastructure, macro environmental constraints on e-commerce and e-commerce related FDI are identified and briefly discussed using a multidimensional analytical framework that accounts for technical, legal and regulatory, and socio-economic issues. The causal relationship between FDI and e-commerce is then discussed. It is concluded that the macro problems that reduce a country's attractiveness for e-commerce are problems that make it less attractive for FDI. However, the relationship goes further than that FDI brings know-bow and infrastructure that enable e-commerce, but conversely, an established e-commerce capacity in a country makes FDI more attractive. The potential global span of e-commerce means that failure to address the macro challenges may reduce existing levels of FDI as investors move to alternative locations, similar to any other adverse socio-economic condition. Policy-wise, Governments must recognise that the ability of countries to engage in e-commerce is tied both directly and indirectly to their attractiveness for FDI. Strategically conceived Government intervention is likely to be required to create competitive advantage in attracting infrastructural or developmental FDI, and then to attract effective entrepreneurial FDI. Just as e-commerce is a factor attracting FDL foreign investment may be a prerequisite for e-commerce, particularly in developing countries.
Global Business & Economics Anthology Vol. 2, p. 1-12