Work

Japan's FDI drivers in a time of financial uncertainty. New evidence based on Bayesian Model Averaging

Year: 2021

Type: article

Abstract: In this paper we analyse the determinants of Japanese outward FDI stock for the period 1996–2017. This period is especially relevant as it covers a process of increasing economic globalization and two financial crises. To this aim, we consider a large set of candidate variables based on the theory as well as on previous empirical analysis. Our sample includes a total of 27 host countries. We select the covariates using a data-driven methodology, the Bayesian Model Averaging (BMA) analysis. Moreover, we also analyse whether these determinants change depending on the degree of development (emerging vs developed) or the geographical areas (EU vs East Asia) of the countries considered. We find that Japan's FDI can be explained by a wide variety of variables, that include not only the typical gravitational ones but also institutional and macroeconomic variables, including those that measure financial development. Moreover, Japanese FDI can be explained by both horizontal and vertical FDI motives in the groups of countries analysed. However, in developed, and more precisely, EU countries, horizontal FDI strategies are predominant, whereas for East Asian and emerging countries, there is more evidence in favour of vertical FDI.

Source: Japan and the World Economy

DOI: 10.1016/j.japwor.2021.101058

Authors: Mariam Camarero, Sergi Moliner, Cecilio Tamarit

Institutions: Universitat Jaume I, Universitat de València

Language: English

Topic: International Business and FDI

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,470

Funders: Ministerio de Ciencia, Innovación y Universidades, European Commission, Generalitat Valenciana