The role of psychic distance stimuli on the East-West FDI location structure in the EU. Evidence from Spanish MNEs

Alfredo Jiménez Palmero, Juan José Durán Herrera and Juan Manuel de la Fuente Sabaté

Journal of East European Management Studies, 2013, vol. 18, issue 1, 36-65

Abstract: Eastern Europe nowadays represents an important and attractive economic area for foreign direct investment. Determinants of investments have converged with those of other European countries. However, it has been argued that a differentiated East-West structure still exists in Europe. This study examines the existence of such a structure from the novel perspective of psychic distance stimuli, showing no evidence of its persistence. Moreover, the results provide evidence on the fundamental role played by different dimensions of psychic distance, especially in levels of industrial development and language, as obstacles to foreign direct investments. On the contrary, distance in education is positively associated with investments, reflecting an efficiency-seeking MNE approach.

Keywords: psychic distance; multinational enterprise; direct foreign investment; conditional logit model; Central and Eastern European Countries (search for similar items in EconPapers)
JEL-codes: J24 L10 L21 L22 L25 L26 P30 (search for similar items in EconPapers)
Date: 2013
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