Behavioural determinants of Foreign Direct Investment
AbstractThe paper presents a behavioural economics approach to foreign direct investment. Starting from the behavioural finance literature, it uses content analysis based on interviews and questionnaires covering 12% of the Portuguese firms with investments abroad. The study presents evidence of several behavioural rules (e.g., herding, cascading, anchoring, overconfidence, mental accounting) in firms’ location decisions that originate a new set of determinants of FDI flows and complement the neo classical paradigm. Moreover, it confirms the Heiner model (1983, 1985, 1989) by showing that the higher is the uncertainty faced by decision makers the more frequent is the use of behavioural rules. The central role of uncertainty helps explaining why FDI flows occur more frequently among developed countries.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10297.
Date of creation: 21 Jul 2008
Date of revision:
Behavioural; Foreign Direct Investment; Uncertainty;
Other versions of this item:
- Ricardo Pinheiro Alves, 2008. "Behavioural Determinants Of Foreign Direct Investment," GEE Papers 0008, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Dec 2008.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-13 (All new papers)
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