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The determinants of the outward foreign direct investment of China and India: Whither the home country?

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  • Tolentino, Paz Estrella

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    (School of Management and Organizational Psychology Birkbeck, University of London)

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    Abstract

    The current study examines the relationships between several home country-specific macroeconomic factors and the level of the outward FDI of China and India using multiple time-series data from 1982 to 2006 and from 1980 to 2006, respectively. With the use of a vector autoregressive model assessing the causal relationships of the endogenous variables, the empirical research proves that Chinese national characteristics associated with income per capita, openness of the economy to international trade, interest rate, human capital, technological capability, exchange rate and exchange rate volatility do not Granger cause the level of outward FDI of China. By contrast, the national technological capability of India Granger causes their level of outward FDI. The level of outward FDI of China does not Granger cause any of the home country-specific macroeconomic factors considered, while the level of outward FDI of India Granger causes their national interest rate.

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    Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 049.

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    Date of creation: 2008
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    Handle: RePEc:unm:unumer:2008049

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    Keywords: outward FDI; home country; FDI determinants; China; India; MNCs; VAR model; foreign direct investment; multinational corporations;

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    Cited by:
    1. Chowdhury, Mamta B, 2011. "India’s Outward Foreign Direct Investment: Closed Doors to Open Souk," MPRA Paper 32828, University Library of Munich, Germany.
    2. Axel Dreher & Peter Nunnenkamp & Krishna Chaitanya Vadlamannati, 2011. "The Role of Country-of-origin Characteristics for Foreign Direct Investment and Technical Cooperation in Post-reform India," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 81, Courant Research Centre PEG.
    3. Szalavetz, Andrea, 2009. "Feltörekvő transznacionális társaságok - a kínai példa a klasszikus elmélet tükrében
      [Ambitious transnational corporations - the example of China in the light of classical theory]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1125-1137.

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