Behavioural determinants of Foreign Direct Investment

Ricardo Pinheiro-Alves

MPRA Paper from University Library of Munich, Germany

Abstract: The paper presents a behavioural economics approach to foreign direct investment. Starting from the behavioural finance literature, it uses content analysis based on interviews and questionnaires covering 12% of the Portuguese firms with investments abroad. The study presents evidence of several behavioural rules (e.g., herding, cascading, anchoring, overconfidence, mental accounting) in firms’ location decisions that originate a new set of determinants of FDI flows and complement the neo classical paradigm. Moreover, it confirms the Heiner model (1983, 1985, 1989) by showing that the higher is the uncertainty faced by decision makers the more frequent is the use of behavioural rules. The central role of uncertainty helps explaining why FDI flows occur more frequently among developed countries.

Keywords: Behavioural; Foreign Direct Investment; Uncertainty (search for similar items in EconPapers)
JEL-codes: D21 F21 (search for similar items in EconPapers)
Date: 2008-07-21
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: BEHAVIOURAL DETERMINANTS OF FOREIGN DIRECT INVESTMENT (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:10297

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