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Trust and foreign ownership: Evidence from intra‐European foreign direct investments

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  • Marco Da Rin
  • Marina Di Giacomo
  • Alessandro Sembenelli

Abstract

We use a novel firm‐level dataset to test whether trust affects the volume and the ownership structure FDI across Europe. Our methodology deals with the endogeneity of trust from the investor to the recipient country. We expect such a trust measure to affect investment decisions, and the associated knowledge capital, differently across types of foreign investors. In particular, this effect is expected to be stronger for industrial investors who possess transferable knowledge capital. The data confirm our predictions. Higher trust increases the number and volume of FDIs, but also the probability of co‐investing with a partner from the recipient country.

Suggested Citation

  • Marco Da Rin & Marina Di Giacomo & Alessandro Sembenelli, 2019. "Trust and foreign ownership: Evidence from intra‐European foreign direct investments," Review of International Economics, Wiley Blackwell, vol. 27(1), pages 313-346, February.
    • Handle: RePEc:bla:reviec:v:27:y:2019:i:1:p:313-346
    DOI: 10.1111/roie.12378
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    Cited by:

    1. Mariotti, Sergio & Marzano, Riccardo, 2021. "The effects of competition policy, regulatory quality and trust on inward FDI in host countries," International Business Review, Elsevier, vol. 30(6).

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