THE IMPACT OF INSTITUTIONAL AND SOCIAL CHARACTERISTICS ON FOREIGN DIRECT INVESTMENT: EVIDENCE FROM JAPAN

Navina Lucke, Alexander Karmann () and Stefan Eichler
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Alexander Karmann: Technische Universitaet Dresden, Faculty of Business Management and Economics, Dresden, D-01062, Germany

Annals of Financial Economics (AFE), 2013, vol. 08, issue 02, 1-55

Abstract: We examine the determinants of Japanese foreign direct investment (FDI) focusing on institutional and social factors. Using panel data on 59 countries from 1995 to 2008, we find that host countries with free and open markets and greater cultural distance from Japan attract Japanese FDI. Good institutions, such as a well-developed legal framework and an effective government, are important in promoting Japanese FDI to emerging economies, whereas fewer regulatory restrictions, lower tax burden, and more religious diversity attract Japanese FDI to developed countries. We find that corruption stimulates Japanese FDI to developed countries, which is contrary to most previous research.

Keywords: FDI; institutions; Japan; panel analysis; JEL Classifications: F21; JEL Classifications: F23; JEL Classifications: H11; JEL Classifications: E02; JEL Classifications: O53 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1142/S2010495213500103

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