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The role of home and host country characteristics in FDI : Firm-level evidence from Japan, Korea and Taiwan

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  • The role of home and host country characteristics in FDI
  • Hayakawa, Kazunobu; Lee, Hyun-Hoon; Park, Donghyun
  • Institute of Developing Economies


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Title The role of home and host country characteristics in FDI
Similar Titles
Sub Title

Firm-level evidence from Japan, Korea and Taiwan

Material Type Reports
Author(English)

Hayakawa, Kazunobu; Lee, Hyun-Hoon; Park, Donghyun

Publisher

Chiba:Institute of Developing Economies

Date 2010-12
Series Title; No IDE Discussion Paper / 267
Pages 27
Subject Country Japan(Asia and Pacific)
South Korea(Asia and Pacific)
Taiwan(Asia and Pacific)
Language English
File Type Link
Subject Economy < Direct Investment
Industry and Technology < Others
Holding Institute of Developing Economies

Abstract

There is a large and growing empirical literature that investigates the determinants of outward foreign direct investment (FDI). This literature examines primarily the effect of host country characteristics on FDI even though home country characteristics also influence the decision of firms to invest abroad. In this paper, we examine the role of both host and home country characteristics in FDI. To do so, we constructed a firm-level database of outward FDI from Japan, Korea, and Taiwan. Our empirical analysis yields two main findings. First, host countries with better environment for FDI, in terms of larger market size, smaller fixed entry costs, and lower wages, attract more foreign investors. Second, firms from home countries with higher wages are more likely to invest abroad. An interesting and significant policy implication of our empirical evidence is that policymakers seeking to promote FDI inflows should prioritize countries with higher wages.