Private and Public Information for Foreign Investment Decisions
CERGE-EI Working Paper Series No. 150
25 Pages Posted: 14 Jan 2010
Date Written: November 1, 1999
Abstract
Previous studies have found that foreign direct investment is significantly related to the stock of existing investment in the area. The present paper makes an additional contribution by providing evidence that investment decisions are positively correlated to the firm’s own previous investment in the area as well as to the current/planned investments by competitors. In addition, it is found that these two channels are primarily substitutes, i.e., investment by competitors comes less important when the firm already has experience in the market. The results are statistically significant and robust to various changes in model specification.
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