Direct and indirect influence of national culture on foreign direct investment

Journal article

Izadi, Selma, Rashid, Mamunur and Izadi, Parviz 2023. Direct and indirect influence of national culture on foreign direct investment. Research in International Business and Finance. 66, p. 102037. https://doi.org/10.1016/j.ribaf.2023.102037
AuthorsIzadi, Selma, Rashid, Mamunur and Izadi, Parviz
AbstractThis study investigates whether extending cultural dimensions leads to different conclusions about foreign direct investment (FDI) inflows. We consider data from 33 developing and developed countries from 2001 to 2017. Several proxies for traditional FDI determinants are considered alongside proxies for financial channels and six-dimensional (6-D) measures of Hofstede’s national culture. The study employs a host of tests based on ordinary least squares, random effects, two-stage GMM, panel vector autoregressive, and estimated generalized least squares tests. Our results indicate the strong influences of economic growth, financial and trade openness, and three cultural variables on FDI inflow in the selected countries. Concerning culture, nations with lower “masculinity” and higher “individualism” and “indulgence” scores attract more FDIs. After controlling for economic growth endogeneity and employing cultural factors as instrumental variables, we conclude that culture affects FDI inflows indirectly through economic growth.
KeywordsFDI inflows; Financial channel; Hofstede culture; Instrumental variable estimation
Year2023
JournalResearch in International Business and Finance
Journal citation66, p. 102037
PublisherElsevier
ISSN02755319
Digital Object Identifier (DOI)https://doi.org/10.1016/j.ribaf.2023.102037
Official URLhttps://www.sciencedirect.com/science/article/abs/pii/S0275531923001630?via%3Dihub
Publication dates
Online19 Jul 2023
Publication process dates
Deposited26 Jul 2023
Accepted15 Jul 2023
Accepted author manuscript
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