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Headquarters intangible capital and FDI

Salvador Gil-Pareja, Rafael Llorca-Vivero and Jordi Paniagua
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Salvador Gil-Pareja: Dep. Applied Economics II, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain). INTECO Research Unit
Rafael Llorca-Vivero: Dep. Applied Economics II, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain). INTECO Research Unit
Jordi Paniagua: Dep. Applied Economics II, University of Valencia, Avda. dels Tarongers s/n, 46022 Valencia (Spain)

No 2107, Working Papers from Department of Applied Economics II, Universidad de Valencia

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 firms, 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 inter-country and inter-sector spillovers. Our results are robust, accounting for HQ intensity, domestic investment flows in the three dimensions and endogeneity tests.

Keywords: FDI; headquarters; spillovers; intangible capital; credit constraints; structural gravity (search for similar items in EconPapers)
JEL-codes: F20 F21 F23 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-fdg and nep-int
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