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Cross-national Distance and FDI: The Moderating Role of Host Country Local Demand

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  • Bailey, Nicholas
  • Li, Sali

Abstract

In this paper, we draw on the demand-side perspective to suggest that host country local demand influences the relationship between cross-national distance and foreign direct investment (FDI). Using FDI outflows from the United States to a cross-sectional sample of 110 host countries over the period of 2006–2011, we find that distance negatively influences FDI, largely confirming previous research. However, our results also suggest that a host country's local demand mitigates the negative relationship between geographic, cultural and administrative distance and FDI outflows, while it aggravates the negative effect of political distance on FDI.

Suggested Citation

  • Bailey, Nicholas & Li, Sali, 2015. "Cross-national Distance and FDI: The Moderating Role of Host Country Local Demand," Journal of International Management, Elsevier, vol. 21(4), pages 267-276.
  • Handle: RePEc:eee:intman:v:21:y:2015:i:4:p:267-276
    DOI: 10.1016/j.intman.2014.11.002
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