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

Listed author(s):
  • Tanaka, Kiyoyasu

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.

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Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 554.

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Date of creation: 01 Feb 2016
Publication status: Published in IDE Discussion Paper = IDE Discussion Paper, No. 554. 2016-02-01
Handle: RePEc:jet:dpaper:dpaper554
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