Regional headquarters and foreign direct investment

Salvador Gil‐Pareja, Rafael Llorca‐Vivero and Jordi Paniagua ()

Review of International Economics, 2022, vol. 30, issue 4, 1288-1310

Abstract: Headquarters (HQs) provide a wide range of services, playing a fundamental role in Foreign Direct Investment (FDI). We use the structural gravity equation to investigate the effect of regional HQs on three dimensions of FDI (number of foreign projects, capital investment, and jobs) at the country‐pair‐sector level. Furthermore, we explore two underlying mechanisms that help explain this relationship: financial constraints and informational costs and uncertainty. We find a positive effect of regional HQs on FDI, as well as intercountry and intersector spillovers. Our results are robust, accounting for HQ intensity, domestic investment, and endogeneity tests.

Date: 2022
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