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From globalization to glocalization: Cultural interdependence as a source of FDI motivation

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  • Chakraborty, Suparna
  • Wang, Miao Grace
  • Wong, M. C. Sunny

Abstract

In this paper, we explore the agglomeration effect of culture on foreign direct investment (FDI). Using data on US FDI to 74 host countries from 1984 to 2017, our analysis shows a negative effect of bilateral cultural distance on US FDI to a host, consistent with previous studies. Central to our research is the application of a higher-order spatial model, which enables us to examine correlations of FDI across various hosts along both geographical and cultural dimensions. We find that US FDI across culturally similar host nations move together. Specifically, our results show that US FDI in a host may rise by 0.25% with every 1% increase in US FDI in other hosts that are culturally similar to the host of interest. Such results are robust to a battery of sensitivity checks, such as controlling for spatial correlation of geographically proximate hosts. Further, the agglomeration effects also display significant variations across industries.

Suggested Citation

  • Chakraborty, Suparna & Wang, Miao Grace & Wong, M. C. Sunny, 2025. "From globalization to glocalization: Cultural interdependence as a source of FDI motivation," Research in Economics, Elsevier, vol. 79(1).
    • Handle: RePEc:eee:reecon:v:79:y:2025:i:1:s1090944325000018
    DOI: 10.1016/j.rie.2025.101024
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    More about this item

    Keywords

    Foreign direct investment; Glocalization; Cultural distance; Cultural interdependence; Spatial analysis;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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