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1 – 10 of over 5000Bing Li, Zhihui Shi and Wei Guo
As foreign direct investment (FDI) plays an important role in economic globalization. This paper examines the structural features of the global FDI network based on FDI flows data…
Abstract
Purpose
As foreign direct investment (FDI) plays an important role in economic globalization. This paper examines the structural features of the global FDI network based on FDI flows data and changes in the position of countries within the network.
Design/methodology/approach
In order to study the structural characteristics of the global FDI network and the status and changes of countries in the global FDI network, the authors build the investment network and apply the QAP (Quadratic Assignment Procedure) analysis to examine the evolutionary characteristics of the network and its influencing factors.
Findings
The global FDI network becomes more interconnected and has a clear “core-periphery” structure. The network connections and volumes have increased dramatically and most countries spread their assets across multiple countries, while only a handful of countries have concentrated investments. The topological structure of the global FDI network has changed noticeably, although this process has been slow and stable and countries in the core position have remained largely intact. The authors find that trade relations between countries, geographic distance and differences in economic size, income levels and institutional environments all have a significant impact on the global FDI network.
Research limitations/implications
Although we find some valuable results, some aspects need further investigation. For example, how a country uses the investment network to boost its economy and how the different industries in the investment network change over time. It is important to get the industry-level details to understand the impact of the global investment network from a government's perspective.
Practical implications
FDI affects the distribution of international capital and contributes to the development of the global economy. Therefore, it is important to study the characteristics of the global FDI network and its development patterns. With more understanding about the network as well as its evolutionary pattern, the government can possibly carry out some policies to promote direct investments as well as economic development.
Social implications
All countries should actively engage in international direct investments and strengthen their economic ties. At the same time, they can put more emphasis on inward or outward FDI based on their own level of economic development to better establish the circulation channel for domestic and international capital.
Originality/value
This paper examines foreign direct investments through the lens of a global network. In contrast to traditional bilateral studies, this paper focuses on the network structure and evolution, reflecting the dynamics of the entire direct investment system as well as the changing positions of participating countries.
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Jianhong Zhang, Jiangang Jiang and Chaohong Zhou
– The purpose of this paper is to analyze the impact of diplomatic activities on outward foreign direct investment (OFDI).
Abstract
Purpose
The purpose of this paper is to analyze the impact of diplomatic activities on outward foreign direct investment (OFDI).
Design/methodology/approach
The paper first develops a set of hypotheses drawing insights from politics, international business and institutional theory. It then tests these hypotheses by estimation of Panel Corrected Standard Error models, using the data of Chinese OFDI flow to 131 countries over the period of 2003-2010.
Findings
The main findings are: friendly bilateral diplomatic activities help OFDI in general; bilateral diplomatic activities provide effective support to some sensitive and important investments; and bilateral diplomatic activities play an important role in host countries where institutions are absent or poor in quality.
Practical implications
Friendly bilateral diplomatic activities provide strong support to multinationals investing abroad.
Originality/value
The paper incorporates a neglected but important factor, diplomacy, into a model to analyze its influences on OFDI. It investigates not only the direct impact of diplomatic activities on OFDI but also their moderating effect on other OFDI determinants, such as economic and institutional factors.
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Luccas Assis Attílio, Joao Ricardo Faria and Mauricio Prado
The authors investigate the impact of the US stock market on the economies of the BRICS and major industrialized economies (G7).
Abstract
Purpose
The authors investigate the impact of the US stock market on the economies of the BRICS and major industrialized economies (G7).
Design/methodology/approach
The authors construct the world economy and the vulnerability between economies using three economic integration variables: bilateral trade, bilateral direct investment and bilateral equity positions. Global vector autoregressive (GVAR) empirical studies usually adopt trade integration to estimate models. The authors complement these studies by using bilateral financial flows.
Findings
The authors summarize the results in four points: (1) financial integration variables increase the effect of the US stock market on the BRICS and G7, (2) the US shock produces similar responses in these groups regarding industrial production, stock markets and confidence but different responses regarding domestic currencies: in the BRICS, the authors detect appreciation of the currencies, while in the G7, the authors find depreciation, (3) G7 stock markets and policy rates are more sensitive to the US shock than the BRICS and (4) the estimates point out to heterogeneities such as the importance of industrial production to the transmission shock in Japan and China, the exchange rate to India, Japan and the UK, the interest rates to the Eurozone and the UK and confidence to Brazil, South Africa and Canada.
Research limitations/implications
The results reinforce the importance of taking into account different levels of economic development.
Originality/value
The authors construct the world economy and the vulnerability between economies using three economic integration variables: bilateral trade, bilateral direct investment and bilateral equity positions. GVAR empirical studies usually adopt trade integration to estimate models. The authors complement these studies by using bilateral financial flows.
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Chang Hoon Oh and Michele Fratianni
The aim of this paper first is to go beyond the static effects of bilateral investment treaties (BITs) and empirically estimate the marginal effects of the stock of BITs on…
Abstract
Purpose
The aim of this paper first is to go beyond the static effects of bilateral investment treaties (BITs) and empirically estimate the marginal effects of the stock of BITs on foreign direct investment flows.
Design/methodology/approach
These statistical models use a gravity equation.
Findings
This paper finds that BITs is subject to diminishing returns measured in terms of FDI flows. Diminishing returns are more pronounced among country-pairs that have not signed BITs but have their own BIT network than among country-pairs with their own BITs.
Research limitations/implications
The subsidiary finding is that a measure of a country’s BIT network characteristic, capturing conditions favorable for a mix of horizontally and vertically integrated activities, may be the limiting force underlying the diminishing returns of the stock of BITs.
Originality/value
For a given country’s BIT network, a multinational enterprise finds more value in investing where a bilateral treaty is in place. This suggests either stronger property-rights protection or greater latitude to use the host country as an export platform.
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Sasidaran Gopalan, Rabin Hattari and Ramkishen S. Rajan
This paper aims to examine the dynamics of foreign direct investment (FDI) inflows into Indonesia. It is interested specifically in analysing and deliberating on two important…
Abstract
Purpose
This paper aims to examine the dynamics of foreign direct investment (FDI) inflows into Indonesia. It is interested specifically in analysing and deliberating on two important policy questions: First, are all kinds of FDI useful from a policy perspective and what does the existing data on FDI reveal about the type of FDI inflows into Indonesia? Second, does the existing data help understand the extent of de facto bilateral linkages between Indonesia and other countries?
Design/methodology/approach
The paper offers an in-depth case study of Indonesia using extensive exploratory data analysis on FDI inflows into Indonesia. As discussed in the paper, the data investigation uses and reconciles available FDI data both from national and international sources to understand the usefulness of such data for policy analysis.
Findings
A data investigation of the trends in different types of FDI flows reveals a discernible downward trend in the ratio of mergers and acquisitions (M&A)–FDI ratio over the years. The paper argues that from a sequencing perspective, while a medium-to-long-term framework encouraging both domestic and foreign Greenfield investments could help Indonesia regain its growth luster, in the near term much more attention needs to be paid to FDI inflows in the form of M&As. Further, reconciling FDI and M&A data might help identify the original sources of FDI flows because existing data are based on flow of funds rather than ultimate ownership.
Practical implications
Since the Asian financial crisis, Indonesia has successfully embarked on a phase of economic and political transition post-Suharto, with the cornerstones of such a strategy being a process of greater democratisation and decentralisation. However, there have been growing concerns of economic growth stagnation in recent years. One of the policies to revive the economy’s lustre adopted by the government has been to attract greater FDI inflows. In this light, this paper examines the dynamics of FDI into Indonesia and deliberates on what kinds of FDI policymakers should focus on attracting to restore the country’s growth lustre.
Originality/value
The question of whether a policy to attract FDI should be careful in distinguishing the kind of FDI it wants to attract has not been sufficiently addressed in the related literature. This paper provides a framework to understand the different macroeconomic policy implications of types of FDI and provides extensive data analysis to not only understand the types of FDI but also sources of bilateral FDI inflows to Indonesia by reconciling FDI and M&A data.
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Faheem Ur Rehman and Abul Ala Noman
China's outward foreign direct investment (OFDI) has risen remarkably over the past two decades. Does such increase affect the sophistication of Chinese exports, is a significant…
Abstract
Purpose
China's outward foreign direct investment (OFDI) has risen remarkably over the past two decades. Does such increase affect the sophistication of Chinese exports, is a significant issue that has surprisingly remained unaddressed? The purpose of this study is to investigate the impact of Chinese OFDI on bilateral export sophistication of China and its OFDI receiving partner countries during 2003–2017 by applying Poisson pseudo-maximum likelihood approach based on gravity model.
Design/methodology/approach
The analysis has been performed for total sample, region-wise grouped sample (Europe and Central Asia, Middle East and North Africa, Latin America and Caribbean, East Asia and Pacific, South Asia, North America and sub-Saharan Africa) and income-wise grouped sample (high income, upper middle income, lower middle income and lower income group sample).
Findings
The results confirmed the significant and positive effect of Chinese OFDI on bilateral export sophistication in total sample, regions-wise and income groups sample.
Originality/value
The study provides a helpful suggestion regarding policy towards achieving more sophistication in export and thus to achieve comparative advantage in trade.
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This study examines the effect of host government interference with foreign investors’ assets on foreign direct investment (FDI) inflow. The author hypothesizes that the…
Abstract
This study examines the effect of host government interference with foreign investors’ assets on foreign direct investment (FDI) inflow. The author hypothesizes that the relationship between host government interference and FDI inflow takes the form of an inverted U shape. The author tests this hypothesis using data from the International Centre for Settlement of Investment Disputes between 1996 and 2017. The results support the above hypothesis. While host government interference with the assets of a few foreign investors may not deter FDI inflow, frequent interferences, which result in an increasing number of host state–foreign investor disputes, reduces FDI inflow in a host country. The analysis also shows that when faced with an increasing host country uncertainty, investors adopt a wait and see strategy. However, how long investors wait depends on the economic situation of the host country. For high-income countries, investors wait until approximately 10 disputes before reducing investments level in a host country, while for low-income countries, this waiting period is a mere two disputes. The findings of this study suggest that countries seeking to attract more FDI should not interfere with the activities of foreign investors, however, if they do, disputes should be settled at home, not in international arbitration courts, because doing so frequently may poison the host environment and deter other foreign investors from investing in the host country.
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Andrew J. Abbott and Glauco De Vita
The purpose of this paper is to investigate the impact of a menu of country‐pair exchange rate regime combinations upon bilateral foreign direct investment (FDI) flows.
Abstract
Purpose
The purpose of this paper is to investigate the impact of a menu of country‐pair exchange rate regime combinations upon bilateral foreign direct investment (FDI) flows.
Design/methodology/approach
The authors use panel data from 27 OECD and non‐OECD high income countries for the period 1980 to 2003. Instrumental variable estimation of a dynamic panel model within a system generalised methods of moments framework allows us to control for both potential correlation issues and endogeneity bias.
Findings
This paper finds that a currency union is the policy framework most conducive to cross‐border investment. Being a member of EMU also appears to spur greater FDI flows with countries floating their currency vis‐à‐vis the default regime of a double‐float. Country‐pair regime combinations involving one country fixing its currency and the other floating or being a member of EMU, are found not to be more pro‐FDI than the default regime combination. For country‐pairs fixing or pegging their currency to each other, the effect on bilateral FDI flows is the least consistent across alternative specifications and, hence, the most ambiguous.
Originality/value
The contribution is also distinguished by the comparative use of recently developed “natural” or de facto exchange rate regime classification schemes, in addition to the de jure classification published by the IMF.
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The purpose of this paper is to investigate the impact of increasing trade and investment relations between China and Latin American economies. The paper focuses on the threats…
Abstract
Purpose
The purpose of this paper is to investigate the impact of increasing trade and investment relations between China and Latin American economies. The paper focuses on the threats and opportunities that permeate this relationship.
Design/methodology/approach
The paper surveys existing literature and secondary data in Spanish, Portuguese, and in English to investigate the different ramifications of this dynamic relationship between China and Latin American economies.
Findings
After analyzing trade and investment trends and data, it is clear that Latin American economies must make changes to increase their participation in the Chinese market. Direct involvement with China is inherently risky, however, the opportunities obviously make the alliance necessary. Latin American economies are under increasing pressure to revamp their business environments and to implement long‐term strategies in order to compete more efficiently with China, domestically and in third‐markets. China has showed Latin American economies that investments in education, R&D, innovation, infrastructure, and friendly business policies, both facilitate and foster the creation of new competitive advantages.
Originality/value
This paper highlights and contributes to a better understanding of the ongoing challenges and opportunities permeating the Chinese Latin America's trade and investment relationship, as well as a indicating a number of areas for further study.
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The purpose of this paper is to examine whether the direction of cultural distance in individualism, power distance, uncertainty avoidance, and masculinity affects bilateral…
Abstract
Purpose
The purpose of this paper is to examine whether the direction of cultural distance in individualism, power distance, uncertainty avoidance, and masculinity affects bilateral foreign direct investment (FDI) activities.
Design/methodology/approach
Panel data that include bilateral FDI between 21 OECD countries, and for FDI from these OECD countries to 14 non‐OECD countries between 1980 and 2000 were used. In addition, hypotheses were tested by using Hofstede's cultural dimensions for FDI between 1980 and 1989 and then by applying the GLOBE (Global Leadership and Organizational Behavior Effectiveness) cultural indices for FDI between 1990 and 2000.
Findings
It was found that difference in individualism between two countries encourages FDI while difference in power distance discourages FDI. In addition, based on Hofstede's cultural scores, the direction of cultural distance matters when a host and a source country differ in uncertainty avoidance and masculinity. However, the finding is mixed with the GLOBE cultural measures.
Research limitations/implications
In this paper, the aggregation of human behavior theory is relied on to develop a theoretical framework. This type of analysis is valid as long as the companies involved are homogenous. Even if multi‐national companies are heterogeneous, the author believes that a bounded rationality is needed to add some discipline and substance to a more comprehensive but less structured analysis/experience at the individual or firm level.
Practical implications
The paper's findings indicate that a complementary relationship exists for FDI between collective and individualistic countries and difference in power distance discourages FDI. In addition, the direction of cultural distance matters for uncertainty avoidance and masculinity. Therefore, it is not always true that companies should shun countries that are culturally different from their home country when making FDI decisions.
Originality/value
The paper makes several contributions to the extant literature. First, the paper responds to the critique by Shenkar, by applying separate rather than the composite cultural distance in empirical research. Second, the paper suggests that cultural distance is not equal to cultural incongruence. Third, this paper is one of the first that uses a sample size that is similar to the number of countries in Hofstede's original study in 1980. Finally, in response to the stability criticism towards Hofstede's framework, this paper tests the cultural impact on FDI by applying both the Hofstede and GLOBE cultural scores.
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