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

Chakrabarti, R and Subramanian, K and Meka, S (2017) Localization of FDI Flows: Evidence on Infrastructure as a Critical Determinant. Journal of Law, Finance, and Accounting, 2 (1). pp. 205-246.

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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 Busines
ISB Creators:
ISB CreatorsORCiD
Subramanian, KUNSPECIFIED
Item Type: Article
Uncontrolled Keywords: International business: Foreign direct investment and entry modes, International business: Emerging markets and economic development
Subjects: Financial Management
Business and Management
Depositing User: Veeramani R
Date Deposited: 11 Jun 2017 14:32
Last Modified: 11 Jun 2017 14:32
URI: http://eprints.exchange.isb.edu/id/eprint/537
Publisher URL: http://dx.doi.org/10.1561/108.00000016
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