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Reconsideration of the Effects of Political Factors on FDI: Evidence from Japanese Outward FDI

Author

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  • Ivan Deseatnicov

    (Graduate School of Economics, Waseda University, Japan)

  • Hiroya Akiba

    (Graduate School of Economics, Waseda University, Japan)

Abstract

This paper empirically examines the role of political factors in the Japanese outward Foreign Direct Investment (FDI) activities with a panel data of 30 developed or developing countries for the period of 1995-2009. The estimation model is constructed on the basis of the OLI (ownership, location and internalization advantages) and knowledge-capital models. Political factors, which represent multiple dimensions of each host country including important institutional assessments, are included as additional explanatory variables with market potential, wages, skilled workforce endowments, investment cost, and openness. It is found that Political factor perception by Japanese MNCs is sensitive to different levels of initial political stability in the host countries. Thus, the model with political factors and traditional explanatory variables reasonably explains recent Japanese outward FDI flows and reveals new patterns in its behavior.

Suggested Citation

  • Ivan Deseatnicov & Hiroya Akiba, 2013. "Reconsideration of the Effects of Political Factors on FDI: Evidence from Japanese Outward FDI," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 35-48, February.
    • Handle: RePEc:bap:journl:130104
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    References listed on IDEAS

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    Cited by:

    1. Maria Chiara Di Guardo & Emanuela Marrocu & Raffaele Paci, 2016. "The Concurrent Impact of Cultural, Political, and Spatial Distances on International Mergers and Acquisitions," The World Economy, Wiley Blackwell, vol. 39(6), pages 824-852, June.

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    More about this item

    Keywords

    Foreign direct investment; Multinational corporations; Political factor;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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