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The determinants of the outward foreign direct investment of China and India: Whither the home country?

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  • Tolentino, Paz Estrella

    () (School of Management and Organizational Psychology Birkbeck, University of London)

Abstract

The current study examines the relationships between several home country-specific macroeconomic factors and the level of the outward FDI of China and India using multiple time-series data from 1982 to 2006 and from 1980 to 2006, respectively. With the use of a vector autoregressive model assessing the causal relationships of the endogenous variables, the empirical research proves that Chinese national characteristics associated with income per capita, openness of the economy to international trade, interest rate, human capital, technological capability, exchange rate and exchange rate volatility do not Granger cause the level of outward FDI of China. By contrast, the national technological capability of India Granger causes their level of outward FDI. The level of outward FDI of China does not Granger cause any of the home country-specific macroeconomic factors considered, while the level of outward FDI of India Granger causes their national interest rate.

Suggested Citation

  • Tolentino, Paz Estrella, 2008. "The determinants of the outward foreign direct investment of China and India: Whither the home country?," MERIT Working Papers 049, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2008049
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    File URL: https://www.merit.unu.edu/publications/wppdf/2008/wp2008-049.pdf
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    Cited by:

    1. Burcak Polat, 2015. "Determinants of FDI into Central and Eastern European Countries: Pull or Push Effect?," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 3(4), pages 39-47.
    2. Dreher, Axel & Nunnenkamp, Peter & Vadlamannati, Krishna Chaitanya, 2013. "The Role of Country-of-Origin Characteristics for Foreign Direct Investment and Technical Cooperation in Post-Reform India," World Development, Elsevier, vol. 44(C), pages 88-109.
    3. Chowdhury, Mamta B, 2011. "India’s Outward Foreign Direct Investment: Closed Doors to Open Souk," MPRA Paper 32828, University Library of Munich, Germany.
    4. Nguyen, Thi Tuong Anh & Doan, Quang Hung, 2016. "Chinese outward foreign direct investment: Is ASEAN a new destination?," MPRA Paper 71890, University Library of Munich, Germany.
    5. Szalavetz, Andrea, 2009. "Feltörekvő transznacionális társaságok - a kínai példa a klasszikus elmélet tükrében
      [Ambitious transnational corporations - the example of China in the light of classical theory]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1125-1137.
    6. Swati Virmani & Edmund Amann, 2015. "Is the evolution of India’s Outward FDI consistent with Dunning’s Investment Development Path sequence?," Working Papers 92160912, Lancaster University Management School, Economics Department.

    More about this item

    Keywords

    outward FDI; home country; FDI determinants; China; India; MNCs; VAR model; foreign direct investment; multinational corporations;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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