Information Technology and Bilateral FDI: Theory and Evidence
AbstractThis paper investigates the impact of communication cost on the FDI activities of multinational corporations (MNCs). First, we provide a theoretical foundation for a gravity-type FDI model, which shows that physical distance and communication technology are important determinants of FDI activities. Second, we apply the ITaugmented gravity model to bilateral FDI data for a total of 47 OECD and non- OECD countries from 1980 to 1997 and find that distance is negatively related to inward FDI stocks while the growth of IT, measured by teledensity and celldensity, has encouraged FDI significantly. The impact is found to be more prominent on FDI from G7 countries to OECD countries, than to non-OECD countries, and more prominent in the 1990s than in the 1980s. Moreover, IT plays a more effective role by reducing communication cost when distance is beyond a threshold range.
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Bibliographic InfoArticle provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.
Volume (Year): 20 (2005)
Issue (Month): ()
Communication cost; FDI; Distance;
Other versions of this item:
- Jeon, Bang Nam & Tang, Linghui & Zhu, Lei, 2012. "Information Technology and Bilateral FDI: Theory and Evidence," MPRA Paper 36628, University Library of Munich, Germany.
- 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
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