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Reconsideration of the Effects of Political Factors on FDI: Evidence from Japanese Outward FDI

  • Ivan Deseatnicov

    ()

    (Graduate School of Economics, Waseda University, Japan)

  • Hiroya Akiba

    ()

    (Graduate School of Economics, Waseda University, Japan)

This paper empirically examines the role of political factors in the Japanese outward Foreign Direct Investment (FDI) activities with a panel data of 30 developed or developing countries for the period of 1995-2009. The estimation model is constructed on the basis of the OLI (ownership, location and internalization advantages) and knowledge-capital models. Political factors, which represent multiple dimensions of each host country including important institutional assessments, are included as additional explanatory variables with market potential, wages, skilled workforce endowments, investment cost, and openness. It is found that Political factor perception by Japanese MNCs is sensitive to different levels of initial political stability in the host countries. Thus, the model with political factors and traditional explanatory variables reasonably explains recent Japanese outward FDI flows and reveals new patterns in its behavior.

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Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

Volume (Year): 3 (2013)
Issue (Month): (February)
Pages: 35-48

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Handle: RePEc:bap:journl:130104
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