In search of spatial interdependence of US outbound FDI in the MENA region

Anjum Siddiqui and Asim Iqbal

The World Economy, 2018, vol. 41, issue 5, 1415-1436

Abstract: The paper investigates the spatial interdependence of US MNE investments in the MENA region. Given the variations in resource endowments, governance structures and degree of infrastructure availability in MENA countries, one would expect these variables to affect an MNE's choice of FDI location. We do find that domestic non†spatial factors such as own country inflation and governance measured by bureaucratic quality as well as infrastructure affect a host country's inward FDI. We also found that only one measure of natural resource endowment; that is, oil and gas exports were instrumental in attracting FDI. This non†spatial result is generally robust and invariant to the two methodologies employed in this study, that is the spatially autoregressive (SAR) model and the spatial Durbin model (SDM). We found that neighbouring countries’ infrastructure availability measured either by “electricity used†or “energy used†affected FDI inflows in a host country. However, this spatial impact was found only in the SDM model. The spatial effects of neighbouring countries’ economic and political conditions and resource endowments were, however, not observed on a host country's inward FDI. The insignificance of both the surrounding market potential and the spatially weighted FDI suggests a purely horizontal motive of MNE investments in the MENA region.

Date: 2018
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