Measuring the Globalization Degree of Foreign Direct Investments from 2001 to 2012: First Interpretations

This paper measures the globalization degree of financial capital investments based mainly on elaborated UNCTAD data from 2001 to 2012. The paper is a joint research project and sets the base for an annual update to gain insight into the rational logic of foreign direct investments (FDI). The globalization degree is measured with a new statistical entropy risk metric which computes the interweaving of capital flows. The FDI Capital Globalization type 2a is part of a more comprehensive globalization types model. The entropy-based metrics used to compute the interweavement of capital flows is based on a Boltzmann-derived concept of entropy, i.e., the higher the order (high inequality), the lower the entropy, leading to a new defined statistical entropy. Translated to economy, the higher the inequality (high concentration of flows), the lower the entropy, i.e., the lower the globalization degree resulting in a higher risk of the economic system. The first results show that FDI during the analyzed period are globalizing. Different than the trade globalization of type 1, where Asia has emerged to become the most globalized region, for the FDI, Europe shows to be the most globalized region. The questions to be answered in this long-term study will deal whether the weakening global trade volume will be substituted by increasing capital investment in new emerging regions or what drives the investment logic.