FDI as an outcome of the market for corporate control: Theory and evidence

Head, Keith; Ries, John

doi:10.1016/j.jinteco.2007.04.004

Cited by 355 publications

(342 citation statements)

References 37 publications

Supporting

Mentioning

324

Contrasting

Unclassified

Order By: Relevance

“…These results are in line with previous works using the same speci cation, such as Benassy-Quere et al (2007) or Head and Ries (2007). Although the signs and signi cance of our control variables 11 See www.icrgonline.com/page.aspx?page=icrgmethods for details on the 22 components of the ICRG composite index.…”

Section: Quality Of Interstate Political Relationssupporting

confidence: 87%

Foreign direct investment and bilateral investment treaties: An international political perspective

Desbordes

Vicard

2009

Journal of Comparative Economics

122

View full text Add to dashboard Cite

Most of the literature dealing with the location of foreign direct investment (FDI) has ignored the fact that multinational enterprises (MNE) are not stateless and that their activities take place within an international political system: the return on their FDI can be greatly in uenced by the quality of interstate political relations between their home and host countries. This paper investigates whether the quality of interstate political relations between countries in uences the volume of bilateral FDI. Thanks to the construction of a new indicator of the quality of interstate political relations, it is found that better interstate political relations foster bilateral FDI, though the signature of a bilateral investment treaty (BIT) may dampen the impact of their uctuations. In addition, the e ect of a variation in the quality of domestic institutions increases with the entry into force of a BIT, suggesting that the latter signals the credibility of an institutional improvement. Overall, when both indirect e ects are considered, the entry into force of a BIT increases bilateral FDI stocks by 16%, on average, a lower impact than those found in previous studies. This e ect nevertheless signi cantly di ers according to the quality of both interstate political relations and domestic institutions. Résumé: La littérature sur la localisation des investissements directs à l'étranger (IDE) ignore, en grande partie, le fait que les entreprises multinationales ne sont pas apatrides et que leurs activités prennent place dans le système politique international. Leur retour sur investissement peut ainsi être grandement a ecté par la qualité des relations politiques entre leur pays d'origine et le pays hôte de leurs investissements. Cet article étudie dans quelle mesure la qualité des relations politiques entre Etats in uence le volume des IDE bilatéraux. En construisant un nouvel indicateur de la qualité des relations politiques internationales, nous montrons qu'entretenir de bonnes relations politiques favorise les IDE bilatéraux. La signature d'un traité bilatéral d'investissement (TBI) limite cependant la pertinence des relations politiques pour les décisions d'investissement. Par ailleurs, l'e et d'une amélioration des institutions domestiques augmente avec l'entrée en application d'un TBI, ce qui suggère que ces accords signalent la crédibilité des institutions domestiques. Dans l'ensemble, lorsque ces deux e ets sont pris en compte, l'entrée en vigueur d'un TBI augmente les stocks bilatéraux d'IDE de 16% en moyenne, un impact moins important que ceux trouvés dans les études précédentes. L'ampleur de cet e et varie cependant beaucoup selon la qualité des relations politiques entre Etats et des institutions domestiques.Mots clés : Investissement direct à l'étranger, Relations politiques internationales, Traités bilatéraux d'investissement, Institutions. JEL classi cation: F21, F53, F59 * We thank Keith Head, Thierry Mayer and Ian Wooton for their helpful comments. A previous version of the paper, entitled Being...

show abstract

Section: Quality Of Interstate Political Relationssupporting

confidence: 87%

Foreign direct investment and bilateral investment treaties: An international political perspective

Desbordes

Vicard

2009

Journal of Comparative Economics

122

View full text Add to dashboard Cite

show abstract

“…Head and Ries (2005) show, however, Japan's inward FDI is still lower even compared with the expected level of FDI given Japan's geography and size of the economy. Following Head and Ries (2008), they model FDI as the result of managers of one country bidding to acquire production units in another country. In the gravitational version of their model, they assume that the success probability of bids decreases as the distance between the country where the managers reside and the country where the production units are located.…”

Section: Inward Fdi To Japanmentioning

confidence: 99%

Has Abenomics Succeeded in Raising Japan's Inward Foreign Direct Investment?

Hoshi

2018

Asian Economic Policy Review

View full text Add to dashboard Cite

Japan is known to have an exceptionally low level of inward foreign direct investment (FDI). The promotion of inward FDI is one of the policy goals of Abenomics structural reforms. This present paper studies the accumulation of Japan's inward FDI stock during the first 3 years of Abenomics (2012Abenomics ( -2015, and finds no evidence that Japan's inward FDI stock increased more than the trend before Abenomics started would have predicted. A comparison of the main policies for promoting inward FDI that have been implemented to the real and perceived impediments to inward FDI reveals that it may be advisable to shift the emphasis of the policy to address more regulatory and administrative issues and to reduce the cost of doing business in Japan.

show abstract

“…With this in mind, we keep physical distance from home as a determinant of FDI in our analysis and use a gravity model in our empirical work, first introduced for international trade by Tinbergen (1962) and used by others to establish a link between distance and trade flows (Anderson, 1979;Bergstrand, 1985;Anderson and Wincoop, 2003;Disdier and Head, 2008;Feenstra et al, 2001). The gravity model has also been used in other work on international flows, including venture capital investments (Cumming and Dai, 2010), mergers and acquisitions (Di Giovanni, 2005), and FDI flows (Kleinert and Toubal, 2010;Hattari and Rajan, 2009;Head and Ries, 2008;Bergstrand and Egger, 2007;Bloingen, 2005;Grosse and Trevino, 1996). Different methodologies have been used in estimating the gravity equation (Anderson and Wincoop, 2003;Egger, 2000;Santos Silva and Tenreyno, 2006).…”

mentioning

confidence: 99%

Home bias persistence in foreign direct investments

Levis

Muradoğlu

Vasileva³

2015

The European Journal of Finance

View full text Add to dashboard Cite

The purpose of this paper is to analyse the issues related to home bias and foreign direct investments. We study the role of physical, cultural, and institutional distances from home on foreign direct investment decisions taken by corporations to assess whether the globalization of the past two decades has reduced their influence. Using the "home bias" framework from the finance literature and the gravity model from the economics literature, we utilize a large sample of both developed and emerging markets, using foreign direct investment (FDI) flows of 6,263 unique bilateral country pairs over a 30-year period. We find strong empirical evidence of persistent home bias in FDI outflows, and we show that not only physical distance but also cultural and institutional similarities between host and source countries remain a decisive factor in foreign corporate investment decisions. We also show that such home bias is persistent over time and is observed around the world.

show abstract

FDI as an outcome of the market for corporate control: Theory and evidence

Cited by 355 publications

References 37 publications

Foreign direct investment and bilateral investment treaties: An international political perspective

Foreign direct investment and bilateral investment treaties: An international political perspective

Has Abenomics Succeeded in Raising Japan's Inward Foreign Direct Investment?

Home bias persistence in foreign direct investments

Contact Info

Product

Resources

About