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 IT-augmented 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 countriesthan 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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 36628.
Date of creation: 01 Feb 2012
Date of revision:
communication cost; FDI; distance;
Other versions of this item:
- Jeon, Bang Nam & Tang, Linghui, 2005. "Information Technology and Bilateral FDI: Theory and Evidence," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 613-630.
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- 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-2012-02-20 (All new papers)
- NEP-ICT-2012-02-20 (Information & Communication Technologies)
- NEP-INT-2012-02-20 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nam Jeon , Bang & F. Stone , Susan, 2000. "Foreign Direct Investment and Trade in the Asia-Pacific Region: Complementarity, Distance and Regional Economic Integration," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 460-485.
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- Francisco Callado & Jana Hromcová & Natalia Utrero, 2012. "Openness and Technology Diffusion in Payment Systems: The Case of NAFTA," Working Papers wpdea1206, Department of Applied Economics at Universitat Autonoma of Barcelona.
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