BEHAVIOURAL DETERMINANTS OF FOREIGN DIRECT INVESTMENT

Ricardo Pinheiro-Alves

No 8, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia

Abstract: The paper presents a behavioural economics approach to foreign direct investment. Starting from behavioural finance theory, it uses content analysis from interviews made to Portuguese managers with investments abroad. The study presents evidence of herding, anchoring, overconfidence, mental accounting and other behaviour rules in firms’ location decisions that originate a set of determinants of FDI flows and complement the neoclassical paradigm. Moreover, it confirms the Heiner model (1983, 1985, 1989) by showing that the higher the uncertainty faced by decision makers the more frequent will be the use of behavioural rules. The central role of uncertainty helps explain why FDI flows occur more frequently among developed countries.

Keywords: Foreign Direct Investment; Behavioural economics; Uncertainty. (search for similar items in EconPapers)
JEL-codes: D21 F21 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2008-12, Revised 2008-12
New Economics Papers: this item is included in nep-cbe
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Citations: View citations in EconPapers (4)

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https://www.gee.gov.pt/RePEc/WorkingPapers/GEE_PAPERS_8.pdf First version, 2008 (application/pdf)

Related works:
Working Paper: Behavioural determinants of Foreign Direct Investment (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:mde:wpaper:0008

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