Prioritization of factors influencing foreign direct investment (FDI) in wind and solar energy projects into a nascent market

Purpose The purpose of this study is to investigate the relative significance of factors that influence investment decision-making to conduct foreign direct investment (FDI) in the wind and solar energy sectors in a nascent market in Bangladesh, which is partially opening up to renewables. Design/methodology/approach This study uses an analytical hierarchy process to investigate the determinants of firms’ decision-making processes in Thailand, Singapore, China, the United Arab Emirates, Japan and the UK. For the analysis of group judgements, a new consensus indicator, Shannon entropy, is introduced to further clarify the relative significance of the determinants for attracting FDI in the solar and wind energy projects. Findings The results reveal that the natural condition dimension assumes the highest weight over institutional and macroeconomic conditions for attracting FDI in Bangladesh’s wind and solar energy projects. In the natural condition dimension, land availability is the most crucial determinant influencing firms’ decision to conduct FDI. Among traditional policy instruments, real exchange rates, tariffs and tax incentives are critically important for ranking the determinants of FDI in renewables. Practical implications This study can assist managers in identifying the relative importance of the key factors influencing FDI in the renewable energy sector. This can also assist governments in establishing appropriate policies for sustainable development of FDI in the renewable energy sector. Originality/value To the best of the authors’ knowledge, this study is the first in Bangladesh’s power sector to systematically investigate the relative significance of factors in ranking the determinants of attracting FDI in solar and wind energy projects. It also discusses the policies for drawing sustainable FDI into Bangladesh’s wind and solar energy sectors.