When Near is Far and Far is Near: A Quantile Regression Model of FDI, Geographic Location and Connectivity
33 Pages Posted: 8 Oct 2019 Last revised: 23 Oct 2019
Date Written: 2017
Building on sociology theory of space, we conceptualize physical geography as separated from its constructed connotations and suggest that the impact of geographic location on FDI is contingent upon the constructed qualities. These qualities include countries’ unilateral economic and institutional characteristics, as they define the meaning of the physical, and connectivity to other countries, which shapes the consequences of the physical for global integration. Quantile regression analyses of FDI flows and stocks to all countries that received FDI during 1980-2017 confirm these predictions and reveal nuanced interdependencies between the contingencies. The contingency effects vary considerably across the FDI distribution and diminish as FDI volumes increase. The findings entail that geography is not destiny, and call for the development of a theory in which geographic location is treated as an endogenous country characteristic, whose consequences for FDI are subject to actions of policy makers and MNEs.
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