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Do international flights promote FDI? : the role of face-to-face communication

Author

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  • Tanaka, Kiyoyasu

Abstract

Air transportation facilitates face-to-face interactions across borders for the spatial expansion of manufacturing production. I investigate the impact of international flights on FDI entry by Japanese firms. I find that FDI entry significantly increases with the weekly frequency of flights from Japan, and the positive impact increases with a proxy for an intensity of face-to-face communication between the parent firm and foreign affiliate. The results are robust to estimation methods, additional control variables, and definitions of face-to-face communication. Thus, the results suggest that flights encourage FDI entry through a reduction in face-to-face communication costs.

Suggested Citation

  • Tanaka, Kiyoyasu, 2016. "Do international flights promote FDI? : the role of face-to-face communication," IDE Discussion Papers 554, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper554
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    References listed on IDEAS

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    More about this item

    Keywords

    Japan; Air transport; Foreign investments; Direct Flight; FDI; Face-to-Face Contact;

    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
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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