The Effect of National Ethical Environment on Japanese FDI in Developing and Developed Countries

31 Pages Posted: 14 Nov 2018

See all articles by Paul W. Beamish

Paul W. Beamish

University of Western Ontario - Asian Management Institute

George Z. Peng

University of Regina - Paul J. Hill School of Business

Jean-Marie Nkongolo-Bakendo

University of Regina - Faculty of Business Administration

Date Written: January 1, 2017

Abstract

We examine the relationships between national ethical environment (NEE) and foreign direct investment (FDI) in developing and developed countries from an institutional theory perspective. Based on an NEE measure developed by Franke and Nadler (2008) and FDI data from the Ministry of Finance of Japan, we find that the relationship between the level of NEE and Japanese FDI inflow is positive for developing countries, but negative for developed countries. Our findings highlight the need to consider both transaction cost and conformity cost when studying FDI behavior, and to distinguish between developing and developed countries due to the fundamental differences in sensitivity of each cost to institutions in these two settings. We call for a refocus on institutional theory’s core purpose of understanding how organizations acquire institutional conformity without sacrificing their internal efficiency. This study also sheds new light on how FDI behaves with regard to ‘socially responsible international business’.

Keywords: conformity cost; eclectic paradigm; institutional theory; national ethical environment; transaction cost

Suggested Citation

Beamish, Paul W. and Peng, George Z. and Nkongolo-Bakendo, Jean-Marie, The Effect of National Ethical Environment on Japanese FDI in Developing and Developed Countries (January 1, 2017). Available at SSRN: https://ssrn.com/abstract=3277685 or http://dx.doi.org/10.2139/ssrn.3277685

Paul W. Beamish

University of Western Ontario - Asian Management Institute ( email )

Richard Ivey School of Business
London, Ontario N6A 3K7
Canada
519-661-3237 (Phone)
519-661-3700 (Fax)

George Z. Peng (Contact Author)

University of Regina - Paul J. Hill School of Business ( email )

3737 Wascana Parkway
Regina
Saskatchewan, S4S 0A2
Canada

Jean-Marie Nkongolo-Bakendo

University of Regina - Faculty of Business Administration ( email )

Canada

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