Localization of FDI flows: Evidence on Infrastructure as a Critical Determinant

Subramanian, K and Chakrabarti, R and Meka, S (2011) Localization of FDI flows: Evidence on Infrastructure as a Critical Determinant. Working Paper. SSRN. (Unpublished)

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Abstract

The localization of Foreign Direct Investment (FDI) to a few economies represents a puzzling aspect of international business. We study the provision of public infrastructure as a determinant of such localization. We employ unique data at the district level in India. We identify using variation: (i) among sectors within a district depending upon the sector’s propensity to attract FDI at the national level; and (ii) FDI into surrounding districts. We find that FDI inflows remain insensitive to changes in infrastructure till a threshold is reached; thereafter, FDI inflows increase steeply with an increase in infrastructure. This non-linear effect potentially explains why FDI remains restricted to a few countries.

Affiliation: Indian School of Business
ISB Creators:
ISB CreatorsORCiD
Subramanian, KUNSPECIFIED
Item Type: Monograph (Working Paper)
Uncontrolled Keywords: BRIC, District, Infrastructure, FDI, India, International Corporate Finance, International Business, MNE
Subjects: Finance
Depositing User: Ilayaraja M
Date Deposited: 09 Jun 2019 11:35
Last Modified: 09 Jun 2019 19:18
URI: http://eprints.exchange.isb.edu/id/eprint/1053
Publisher URL: http://dx.doi.org/10.2139/ssrn.1712185
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