The Impact of Foreign Direct Investment on Employment in Canada

Steven Tairu Bello, Ph.D
International Journal of Economics and Business Administration, Volume IX, Issue 4, 212-226, 2021
DOI: 10.35808/ijeba/744


Purpose: Canada strives to make its national space conducive for foreign direct investment (FDI) due to the many years of benefit from such economic activities. FDI has contributed to the development of the country in several ways including the generation of employment opportunities, greater business activities, which leads to higher quality goods and services at lower prices, more consumer choices and an overall increase in the quality of life. This paper measures the sole impact of FDI on employment in Canada. Design/methodology/approach: Engaging a quantitative data obtained from Statistics Canada, MacroTrends, and other reliable sources, and using a simple regression analysis, the paper examined the extent of the variation in employment in Canada that is explained by foreign direct investment. Several statistical analytics were used to analyze the data. Findings: The R = 0.76, indicates a significant positive relationship between FDI and employment. The R2 = 0.58, shows that 58% percent of the variations in employment is explained by the regression line or by FDI. This is quite significant. The Adj R2 = 0.56. The output of the test statistics also indicate that the results are statistically significant. The F-stat value of 36.79 versus F-critical value of 4.21 at 5% level of significance (α = 0.05) indicates statistical significance. The five year forecast also indicates an increasing impact of FDI on employment. Research limitations/implications: This paper examined the sole impact of foreign direct investment on employment in Canada. The regression results established a moderately strong positive relationship between the two variables thereby confirming the strong role of FDI on employment generation in Canada. With about 58% coefficient of determination, the study provides a room for further research into the remaining 42% factors that determine the variation in employment. Practical implications: Canada depends largely on inward foreign direct investment to generate employment. This poses some threat to the country's employment rate in the event of any major obstacle to inward foreign direct investment. It also implies that the domestic investors or companies need to square up to compete in the market place in Canada. Finally, it means that foreign companies or foreign investors have great opportunities to thrive in Canada. Social implications: Consumer choices in Canada is largely supported by the products and services provided by foreign investors. This provides significant improvement in the social status of many Canadian residents. Originality/value: Capturing the sole and specific impact of inward foreign direct investment on employment in Canada adds significant value to the body of knowledge about FDI in the country. It provides some clarity to this area of study to many scholars, business executives and government officials in Canada.

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