2013/01/01 by Harald Badinger, Peter Egger, Badinger, Harald +1
Business, Management and Accounting · Economics, Econometrics and Finance · #Economic Policies and Impacts #Global trade and economics #International Business and FDI
paper · pdf · doi:10.57938/179dd7ff-ccdf-40c3-842b-1a5625a58203
openalex publication_date 2013/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/01
Empirical trade economists have found that shocks on foreign direct investment (FDI) of some parent country <br/>in a host country affect the same parent country´s FDI in other hosts (interdependent hosts). Independent of this, there is evidence that shocks on a parent country´s FDI in some host economy affect other parent countries´ FDI in the same host (interdependent parents). In general equilibrium, shocks on FDI between any country pair will affect all country-pairs´ FDI in the world, including anyone of the two countries in a pair as well as third countries (interdependent third countries). No attempt has been made so far to allow simultaneously for all three modes of interdependence of FDI. Using cross-sectional data on FDI among 22 OECD countries in 2000, we employ a spatial feasible generalized two-stage least squares and generalized moments estimation framework to allow for all three modes of interdependence across all parent and host countries, thereby distinguishing between market-size-related and remainder interdependence. Our results highlight the complexity of multinational enterprises´ <br/>investment strategies and the interconnectedness of the world investment system.