Finance-specific Factors as Drivers of Cross-border Investment – An OLI Perspective

Jens Forssbæck and Lars Oxelheim

No 767, Working Paper Series from Research Institute of Industrial Economics

Abstract: In this paper we empirically test the role of firm-specific financial characteristics as drivers of international investment and production. We hypothesize that financial strength generates advantages that can be exploited through cross-border investment activity. The hypothesis is tested in a series of binary-response models, using a sample of 1379 European non-financial firms’ international acquisitions. Controlling for traditional firm- and target-country-specific FDI determinants within an OLI framework, we find strong evidence that financial factors play a significant role in explaining cross-border investment. We conclude that without explicit consideration of the financial dimension, firms’ FDI decisions cannot be properly understood.

Keywords: FDI; OLI; Cross-border Acquisitions; Cost of Capital; Financial Strategy; Financial Variables (search for similar items in EconPapers)
JEL-codes: E22 F21 F23 L23 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2008-09-24
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (15)

Published as Forssbaeck, Jens and Lars Oxelheim, 'Finance-specific Factors as Drivers of Cross-border Investment – An OLI Perspective' in International Business Review, 2008, pages 630-641.

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0767

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