Emotions and foreign direct investment: A theoretical and empirical exploration

Abstract

■ Emotions are largely absent in economic models. Possibly for this reason, many theories fail to explain the actual decisions made by managers.■ Therefore, we integrate emotions with regular microeconomic theory. We focus on FDI decisions, and include both economic and emotional variables in our analysis of the firm's decision-making process.■ In our theoretical analysis, emotions are included in a utility maximization model that considers not only the utility of the firm but also the utility of the individual decision-maker.■ In our empirical analysis, the presence of emotions in FDI decision-making is tested using a sample of Dutch enterprises that considered an investment in Central or Eastern Europe between 1990 and 2000. Key Results■ The empirical results show that emotions are important in economic decisionmaking. The presence of positive emotions increases the chance of Dutch firms to engage in an FDI in Central and Eastern Europe.

Investing in Peace: The Motivational Dynamics of Diaspora Investment in Post-Conflict Economies

“…Van de Laar and de Neubourg (2006) suggest that Emotions are still largely absent in economic theory, though the inclusion of emotions in for example game theory…is becoming more current. However, in decision-making theories, emotions are still not often included.…”

“…The emotional satisfaction return underlying altruism has also been identified as a key motivator for volunteerism (Mowen and Sujan, 2005). Van de Laar and de Neubourg (2006) called for a greater investigation into non-pecuniary motivations for investment.…”

“…Historically, the international finance literature has assumed that investment decisions are predicated on financial return expectations. As Van de Laar and de Neubourg (2006) point out, ''Emotions are largely absent in economic models [of investment]. Possibly for this reason, many theories fail to explain the actual decisions…'' (p. 207).…”

Effect of Emotional Intelligence on Investment Decision Making With a Moderating Role of Financial Literacy

“…Emotions influence decisions making and are considered as a tool to solve problems in decision making (de Laar & Neubourg, 2006). This capability of emotional intelligence not only improves the system of decision making but also the consequence of the decision making.…”

“…Emotions are considered a tool to solve problems in decision making as they influence decisions (de Laar & de Neubourg, 2006).…”