Investigating the Determinants of Local Content Policy in G-20 Countries

Abstract

The local content policy encompasses measures governments or organizations implement to stimulate or mandate the utilization of domestically produced goods and services across various industries or sectors. This policy boosts economic growth, fosters job creation, and promotes development by prioritizing local resources and industries over imported alternatives. Within this framework, current research examines the factors influencing local content policies within G-20 countries over the period spanning from 2002 to 2021. This research employs panel data regression analysis, considering variables such as the number of listed companies as an indicator of local content, foreign direct investment, political stability, corruption, research and development expenditure, tariff rates, and exports and imports. The findings reveal an inverse relationship between corruption levels and economic growth with the number of domestically listed firms. Conversely, import volumes, political stability, research and development expenditure, and tariff rates exhibit a positive and statistically significant impact on the number of domestically listed companies. This research provides valuable insights for promoting local content and developing policies to effectively leverage domestic companies for innovation-driven, inclusive, and sustainable economic development.