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Institutional Determinants of Japanese Outward FDI in the Manufacturing Industry

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  • Raphaël Chiappini

Abstract

This paper explores the relationship between six indicators of governance and outward foreign direct investment (FDI) in the Japanese manufacturing industry. We estimate a gravity model of FDI for 30 host countries covering the period 2005-2011, employing Heckman's two-step sample selection correction in order to tackle the issue of zero-value observations. The results indicate that Japanese overseas investments are driven by host market size, yen real exchange rate, macroeconomic stability, resource endowments and policy variables. In particular, we find that confidence societal rules, control of corruption, government effectiveness, political stability and private sector policies are important factors driving FDI.

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File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2014-11.pdf
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Paper provided by Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis in its series GREDEG Working Papers with number 2014-11.

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Length: 28 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:gre:wpaper:2014-11

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Keywords: Outward foreign direct investment (FDI); institutions; gravity model; Heckman sample selection model;

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