FDI Escapism: the effect of home country risks on outbound investment in the global economy
Over the past few decades, large numbers of literatures in behavior finance have examined firm's internationalization motives, with focused on how host country's risk components affect investment inflow. But the effects of home country risk on investment outflow remain unexamined. Therefor...
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| Format: | Article |
| Language: | English |
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AIMS Press
2022-03-01
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| Series: | Quantitative Finance and Economics |
| Subjects: | |
| Online Access: | https://www.aimspress.com/article/doi/10.3934/QFE.2022005?viewType=HTML |
| _version_ | 1818495244177506304 |
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| author | Osarumwense Osabuohien-Irabor Igor M. Drapkin |
| author_facet | Osarumwense Osabuohien-Irabor Igor M. Drapkin |
| author_sort | Osarumwense Osabuohien-Irabor |
| collection | DOAJ |
| description | Over the past few decades, large numbers of literatures in behavior finance have examined firm's internationalization motives, with focused on how host country's risk components affect investment inflow. But the effects of home country risk on investment outflow remain unexamined. Therefore, based on the conceptualization of FDI escapism and the combine frameworks of Dunning's eclectic paradigm and internationalization theory, the objectives of this study are twofold: First, to examine and explain the effects of home country composite risks (which encompasses economic risks, financial risks, political risk) on firms' internationalization motive through outward FDI. Second, to determine which components of home country risk "pushes" firms to initiate the FDI escapism phenomenon in global market. Findings reveal that home country composite risk has moderate adverse effect on investment flow abroad, contributed by both the political and financial risk components, which may give rise to escaping FDI. These findings suggest that firm may initiate outward FDI as a partial escape strategy to address the political and financial challenges in their home country. These results are robust to endogeneity issue and have several substantial implications for policy design to reduce country risks in order to achieve firm's specific objective and government policy goals. |
| first_indexed | 2024-12-10T18:17:55Z |
| format | Article |
| id | doaj.art-e288391f30c2427b887e9587ba28dbc3 |
| institution | Directory Open Access Journal |
| issn | 2573-0134 |
| language | English |
| last_indexed | 2024-12-10T18:17:55Z |
| publishDate | 2022-03-01 |
| publisher | AIMS Press |
| record_format | Article |
| series | Quantitative Finance and Economics |
| spelling | doaj.art-e288391f30c2427b887e9587ba28dbc32022-12-22T01:38:17ZengAIMS PressQuantitative Finance and Economics2573-01342022-03-016111313710.3934/QFE.2022005FDI Escapism: the effect of home country risks on outbound investment in the global economyOsarumwense Osabuohien-Irabor 0Igor M. Drapkin1School of economics and management, department of international economics, Ural Federal University, Yekaterinburg, RussiaSchool of economics and management, department of international economics, Ural Federal University, Yekaterinburg, RussiaOver the past few decades, large numbers of literatures in behavior finance have examined firm's internationalization motives, with focused on how host country's risk components affect investment inflow. But the effects of home country risk on investment outflow remain unexamined. Therefore, based on the conceptualization of FDI escapism and the combine frameworks of Dunning's eclectic paradigm and internationalization theory, the objectives of this study are twofold: First, to examine and explain the effects of home country composite risks (which encompasses economic risks, financial risks, political risk) on firms' internationalization motive through outward FDI. Second, to determine which components of home country risk "pushes" firms to initiate the FDI escapism phenomenon in global market. Findings reveal that home country composite risk has moderate adverse effect on investment flow abroad, contributed by both the political and financial risk components, which may give rise to escaping FDI. These findings suggest that firm may initiate outward FDI as a partial escape strategy to address the political and financial challenges in their home country. These results are robust to endogeneity issue and have several substantial implications for policy design to reduce country risks in order to achieve firm's specific objective and government policy goals.https://www.aimspress.com/article/doi/10.3934/QFE.2022005?viewType=HTMLcountry risksinternationalizationfdi escapismeconomic riskspolitical riskfinancial risks |
| spellingShingle | Osarumwense Osabuohien-Irabor Igor M. Drapkin FDI Escapism: the effect of home country risks on outbound investment in the global economy Quantitative Finance and Economics country risks internationalization fdi escapism economic risks political risk financial risks |
| title | FDI Escapism: the effect of home country risks on outbound investment in the global economy |
| title_full | FDI Escapism: the effect of home country risks on outbound investment in the global economy |
| title_fullStr | FDI Escapism: the effect of home country risks on outbound investment in the global economy |
| title_full_unstemmed | FDI Escapism: the effect of home country risks on outbound investment in the global economy |
| title_short | FDI Escapism: the effect of home country risks on outbound investment in the global economy |
| title_sort | fdi escapism the effect of home country risks on outbound investment in the global economy |
| topic | country risks internationalization fdi escapism economic risks political risk financial risks |
| url | https://www.aimspress.com/article/doi/10.3934/QFE.2022005?viewType=HTML |
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