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Determinants of Foreign Direct Investment

In: Foreign Direct Investment

Author

Listed:
  • Bruce A. Blonigen
  • Jeremy Piger

Abstract

Empirical studies of bilateral foreign direct investment (FDI) activity show substantial differences in specifications with little agreement on the set of included covariates. We use Bayesian statistical techniques that allow one to select from a large set of candidates those variables most likely to be determinants of FDI activity. The variables with consistently high inclusion probabilities include traditional gravity variables, cultural distance factors, relative labour endowments and trade agreements. There is little support for multilateral trade openness, most host-country business costs, host-country infrastructure and host-country institutions. Our results suggest that many covariates found significant by previous studies are not robust.Les déterminants de l’investissement direct à l’étranger. Les études empiriques des déterminants des activités d’investissement direct bilatéral à l’étranger ont des spécifications substantiellement différentes et peu d’accord sur les variables co-reliées incluses. On utilise des techniques statistiques bayesiennes qui permettent de balayer un vaste ensemble de variables à la recherche de celles qui sont davantage susceptibles d’être des déterminants des activités d’investissement direct à l’étranger. Les variables qui se retrouvent de manière régulière dans la liste de haute probabilité d’impact sont les variables reliées à la gravité, les facteurs liés à la distance culturelle, les dotations relatives en facteur travail, et les accords commerciaux. Il y a peu de support pour des variables comme l’ouverture au commerce multilatéral, la plupart des coûts d’affaires, les infrastructures et les institutions dans les pays hôtes. Ces résultats suggèrent que plusieurs co-variations qu’on a jugées significatives dans les études antérieures ne sont pas robustes.

Suggested Citation

  • Bruce A. Blonigen & Jeremy Piger, 2019. "Determinants of Foreign Direct Investment," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 1, pages 3-54, World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789813277014_0001
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    More about this item

    Keywords

    Foreign Direct Investment; Multinational Enterprises; Mergers and Acquisitions; Greenfield; Trade Policy; Taxation; Spillovers; Offshoring; Wage Inequality; Firm-Specific Assets; Antidumping; Tariff-jumping; Industrial Organization; Ownership-Location-Internalization Theory;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F6 - International Economics - - Economic Impacts of Globalization

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