Explaining Japanese direct investment flows into an enlarged Europe: A comparison of gravity and economic potential approaches (original) (raw)
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Europe since the beginning of the region's transition. The use of rm level data on Japanese foreign direct investment (FDI) in the region allows us to focus on the industry, location and timing of af liate establishment at a level of detail previously unexamined. This enables us to compare Japanese investment with overall regional inward investment as well as investigate country specialisation patterns within the region. We also characterise the type of investing parent, and determine how investments in CEE t into the European-wide investment patterns for these rms. Finally, we investigate the entry mode choices of investing rms, nding a shift from minority-owned joint ventures and limited participation in the region in favour of wholly-owned subsidiaries and larger involvement in the region.
What Gravity Models Can Tell Us About the Position of German FDI in Central and Eastern Europe
SSRN Electronic Journal, 2000
The tradition of gravity models is in the analysis of trade flows with market size and geographic or economic distance as core variables. Both these variables can be important determinants of FDI, too. However, when such models are used to explain FDI, there can be differences in the mode of operation of these variables so that the interpretation can become uncertain. Market size can reach beyond the host country and distance can be an incentive as well as an impediment to FDI. In the present paper, we use gravity-type models in order to assess the level of German FDI in CEE countries, distinguishing between the four nearby core countries and the other six EU accession countries. Estimates are done both on the basis of an in-sample as well as an out-of-sample approach on the basis of FDI in 81 important host countries. From the various specifications it becomes obvious that (1) beside the size of the host country, the market potential of neighboring countries is an important determinant of the regional structure of German FDI, and (2) the costs of operating at a distance seem to be weighted higher than the advantage of being close to distant markets. Geographic distance seems to be more important than various measures of economic distance. On the whole, gravity-type models seem to be appropriate to explain the regional structure of FDI. However, the results should be interpreted with caution given the extremely wide confidence intervals of the estimates which is a feature of former studies, too.
Patterns of foreign direct investment in the New EU countries
Romanian Journal of Economic …, 2009
The aim of the paper is to assess the determinants of foreign direct investment (FDI) inflow for the recent members of the EU (CEEC-4 1 ) using panel data methods. Our analysis is important because FDI is considered as a main contributor to economic development, modernization, income growth, catching-up process and changes in specialization structure. In this paper, we adopt a rigorous econometric model to explain the FDI inflows. We examine the role played by economic and non-economic factors in FDI attractiveness. Using the gravity model and recent econometric techniques, we obtain the unbiased and convergent estimators. From an econometric point of view, the use of a Fixed Effect Vector Decomposition (FEVD) estimator for the gravity model appears to be convenient for our data sample.
Characteristics and performance of Japanese foreign direct investment in Europe
European Management Journal, 1995
This article by Detlev Nitsch, Paul Beamish and Shige Makino provides an illuminating presentation of the characteristics and performance of 118 Japanese subsidiaries in Europe. The study is one of the few that contains performance data at the subsidiary level. Subsidiary performance is limited to the initial mode of entry, industry and country of entry, subsidiary size, and reasons for entering. Japanese investment in Europe grew significantly in the late 1980s, but was heavily concentrated in a few industries. Entry mode preferences have also shifted, away from greenfield start-ups to more use of joint ventures. Conclusions are of interest to European and non-European corporate managers, and public policy-makers. The European Union attracts the attention of managers in other parts of the world both as a source of serious global competitors, and as a compelling market for a multinational firm's products. This artide examines the latter point, looking at Europe as a manufacturing site from the point of view of Japanese manufacturing corporations with subsidiaries in the region. Europe has often been depicted in the popular and business press as a homogeneous entity, especially in the late 1980s and early 1990s as worldwide excitement about '1992' reached a fever pitch. Managers were exhorted to pay attention to 'EC '92', or to 'go to Europe', without regard for where their business would be located once behind the 'EC barrier'. Readers of this Journal are, of course, well aware that cultural, political, regulatory, and other differences exist between Western European countries. Indeed, many writers have described these differences, in this and other journals.
Japanese Foreign Direct Investment in the Visegrád Four: Trends, Characteristic and Driving Forces
Foreign Policy Review, 2021
Japan continues to be the most important Asian investor in Poland and Czechia, and the second most important player in Hungary and Slovakia (after South Korea). Japanese multinationals, operating in the automotive, electronics and other industries, as well as in certain services, play an important role in the Central and Eastern European economies, enhancing the performance of the respective V4 economies. Although compared to, for instance, German MNCs' investment, Japanese MNCs represent a rather minor share in the total FDI stock of these countries, the number of companies increase year-on-year. The paper briefly presents the history and main trends of Japanese investment in the V4 region, maps out the main characteristics of Japanese investment flows, and identifies the driving forces of Japanese FDI within the V4 region. The last section of the paper also sheds light on a new opportunity for the V4 countries to attract more investment from Japanese companies, that is the Japanese companies' possible relocation to the V4 region from the United Kingdom, as a result of Brexit.
The Journal of International Trade & Economic Development, 2013
Based on a spatially augmented gravity model the current paper isolates spatial interrelationships in Foreign Direct Investment (FDI) to Central and Eastern European Countries (CEECs) not only across the destination but also across the origin country dimension of FDI. Results show that: (i) spatial interrelationships across destination countries are present and are consistent with the predominance of vertical-complex FDI in total FDI; (ii) spatial correlation across origin countries is given in earlier years of transition, while demonstration and competition effects cancel over the whole sample period; and (iii) agglomeration forces gain in importance for FDI to CEECs.
RePEc: Research Papers in Economics, 2012
Based on a spatially augmented gravity model the current paper isolates spatial interrelationships in Foreign Direct Investment (FDI) to Central and Eastern European Countries (CEECs) not only across the destination but also across the origin country dimension of FDI. Results show that: (i) spatial interrelationships across destination countries are present and are consistent with the predominance of vertical-complex FDI in total FDI; (ii) spatial correlation across origin countries is given in earlier years of transition, while demonstration and competition effects cancel over the whole sample period; and (iii) agglomeration forces gain in importance for FDI to CEECs.
An Application of the Gravity Model: Exploring Foreign Direct Investment in the Balkan Region
An Application of the Gravity Model: Exploring Foreign Direct Investment in the Balkan Region, 2023
This paper aims to investigate the factors influencing foreign direct investment (FDI) inflows. The study examines several key variables, including Gross Domestic Product (GDP), distance, FDI inflow, percentage of manufacturing value-added, inflation rate, real interest rate, and the index of Economic Freedom. The gravity model analyzes the potential relationships between these independent variables and FDI inflows. Utilizing a logarithmic function, we explore the extent to which FDI inflows are associated with the other variables. The data utilized in this analysis are obtained from reputable sources such as the World Bank and the International Monetary Fund (IMF). The findings reveal a statistically significant relationship between the dependent variable (FDI inflows) and the independent variables.
Eastern Enlargement of the European Union and Foreign Direct Investment Adjustments
The purpose of this paper is to examine the changes that have occurred in the course and in the geographical structure of direct investment in the present and future members of the EU during the nineties and trying to explain their determining factors. To this end, a gravitational model is estimated incorporating the ideas developed recently in the Economic Geography models. In view of the fact that a process of liberalisation of the investment flows between the Fifteen and candidates has taken place during these years - in the framework of the Association Agreements - it may be contended that the explanation for what has happened so far represents key information for predicting the adjustments that may occur in the coming years, when the candidates become full members of the Union.
Putting Japanese investment in Europe in its place
Area, 1997
Research on Japanese economic activity in Europe concentrates almost exclusively on investment in manufacturing. However, this paper demonstrates that this emphasis both underestimates the longevity of Japanese direct investment in Europe and also grossly underdefines the importance of services. Not only does Japanese direct investment have a much longer history in Europe than is usually recognized but also-and perhaps more significantly-the bulk of that investment is not in manufacturing production per se but in a variety of circulation services. Using establishment-level data, this paper shows that the spatial manifistation of these circulation services is very different from that of manufacturing production.