Testing the knowledge-capital model of foreign direct investment: New evidence

Henk Kox

MPRA Paper from University Library of Munich, Germany

Abstract: The knowledge-capital (KC) model of FDI explains the international distribution of FDI, assuming that firms own proprietary knowledge assets that can at low costs also be exploited in foreign subsidiaries. The model's implication is that countries with much outward FDI should have a relative abundance of proprietary knowledge assets, which has up to now not been adequately tested, partly due to a lack of data. This paper extends the KC model by a module that formalises the encapsulation of public national knowledge assets into proprietary firm-level assets. It provides a way to test the basic tenet of the KC model. We exploit a new dataset (80 indicators, 209 countries, period 2000-2020) to identify the impact and statistical significance of national knowledge assets for explaining outward FDI. Our test confirms the validity of the KC model for explaining patterns of outward FDI. Several robustness tests confirm the stability of our findings.

Keywords: foreign direct investment; knowledge-capital model; empirical testing; 2000-2020; 209 countries (search for similar items in EconPapers)
JEL-codes: D21 F21 F23 (search for similar items in EconPapers)
Date: 2022-08
New Economics Papers: this item is included in nep-int, nep-knm and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:114177

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