The usefulness of private and public information for foreign investment decisions
Using a specially designed survey of Japanese firms planning investments in Asia, the authors emphasize the importance of privately held information in making foreign investment decisions. Information on operating conditions based on direct experience in a country is likely to be the most credible information, but for investors new to a country, information inferred from observing others investing in that country may be more influential. Initially, in fact, observing the actions of competitors seems to lead to cascading investments in that country, apparently through herd behavior (as in China and Vietnam). Countries which do not draw a critical mass of investors are in danger of being bypassed for significant periods. Publicly available information is important in helping shape average perceptions about a country,leading potential investors to view particular locations favorably. Privately held information complements that pubic information, and accounts for important variations in investment plans. Subjective perceptions about policy on foreign direct investments are also important. Policy designed to attract investors -for example, special zones for foreign investors- have been successful in many instances, especially in East Asia, but have also been a waste of scarce investment resources when not appropriately planned. And such policy is of little value in attracting those already investing in a country, or those who already perceive rivals to be active there.
|Date of creation:||28 Feb 1997|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Head, Keith & Ries, John & Swenson, Deborah, 1995.
"Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States,"
Journal of International Economics,
Elsevier, vol. 38(3-4), pages 223-247, May.
- Keith Head & John Ries & Deborah Swenson, 1994. "Agglomeration Benefits and Location Choice: Evidence from Japanese Manufacturing Investment in the United States," NBER Working Papers 4767, National Bureau of Economic Research, Inc.
- Ashoka Mody & Krishna Srinivasan, 1998. "Japanese and United States Firms as Foreign Investors: Do they march to the same tune?," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 778-799, November.
- Scharfstein, David S & Stein, Jeremy C, 1990.
"Herd Behavior and Investment,"
American Economic Review,
American Economic Association, vol. 80(3), pages 465-479, June.
- Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010.
"A theory of Fads, Fashion, Custom and cultural change as informational Cascades,"
Levine's Working Paper Archive
1193, David K. Levine.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1733. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.