Date: 2017
Type: Working Paper
Asymmetric cultural proximity and greenfield FDI
Working Paper, EUI RSCAS, 2017/56, Global Governance Programme-284, Global Economics
FIORINI, Matteo, GIOVANNETTI, Giorgia, LANATI, Mauro, SANTI, Filippo, Asymmetric cultural proximity and greenfield FDI, EUI RSCAS, 2017/56, Global Governance Programme-284, Global Economics - https://hdl.handle.net/1814/48784
Retrieved from Cadmus, EUI Research Repository
This paper investigates the role of cultural proximity (CP) on greenfield foreign direct investment (FDI). We build a conceptual framework that explicitly accounts for the asymmetric dimensions in the cultural relationship between two countries, and single out a symmetric element (similarity) and an asymmetric one (attractiveness) within a broad notion of CP. We use bilateral trade in cultural goods to proxy for asymmetric and time-dependent CP. We revisit the existing supply/origin-side theories of bilateral FDI to derive a gravity equation suited for testing the impact of both directions of asymmetric CP. To this end, we introduce several ‘destination-side’ mechanisms to rationalize the potential role of the origin’s culture attractiveness for the country that hosts the investment project. The econometric analysis confirms a positive role of asymmetric CP as a determinant of Greenfield FDI, and suggests a stronger contribution of the destination-side channels.
Cadmus permanent link: https://hdl.handle.net/1814/48784
ISSN: 1028-3625
Series/Number: EUI RSCAS; 2017/56; Global Governance Programme-284; Global Economics
Keyword(s): Cultural proximity Greenfield FDI Cultural trade Gravity model F14 F21 F23 Z10