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Doctoral thesis

The effects of connectivity and culture on foreign direct investment decisions : empirical evidence from the international electricity industry

    19.12.2011

113 p

Thèse de doctorat: Università della Svizzera italiana, 2011 (jury note: cum laude)

Foreign direct investment
Culture
Connectivity
Social network analysis
English With the significant growth in Foreign Direct Investment (FDI) in the past two decades, both investment managers and policy makers are keen to know the factors determining the location of FDI. The eclectic theory, while being the most popular and dominant theories in international investment, failed to fully capture the behavioral dynamics of international investment. For instance, FDI location decisions sometimes concern the certain social or political relationships between the home and host countries such as “cultural ties”. And firms’ international partners and competitors’ investment decisions impact their decisions as well. FDI thus is thus progressively realized by researchers being a complex and multi-dimensional phenomenon and FDI theories also gradually moved from the economics domain towards the new interdisciplinary field of international business, which is more concerned with firm strategy. Bandelj and Uzzi proposed a “relational approach” and “embeddedness view” respectively to explain the FDI location choice from a firm strategic perspective. The common point of the two views is that they see FDI as a dyadic relation between home and host parties, and assume that the formation of investment relation occurs through certain ways of relationship and connectivity. Even though FDI has been recognized as a relational phenomenon, few studies have provided properly quantitative results mainly due to data scarcity and analysis tools constraints. In this study I interpret FDI as a linkage that firms in their home country establish with their host and aim to understand how a FDI linkage is formed through the effects of relationship and connectivity. The study issues are addressed in the three chapters in the thesis by relying on Social Network Analysis (SNA). Cross-border M&A transaction data during the period of 1997 - 2001 in the international electricity industry among 38 countries are selected as data samples for the analysis. Analyses reported in these three papers provide empirical evidence in support of the view that the formation of FDI linkages is through connectivity and cultural relationship mechanisms.
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Economics
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