General equilibrium long-run determinants for Spanish FDI: a spatial panel data approach

Abstract

While general equilibrium theories of trade stress the role of third-country effects, little work has been done in the empirical foreign direct investment (FDI) literature to test such spatial linkages. This paper aims to provide further insights into long-run determinants of Spanish FDI by considering not only bilateral but also spatially weighted third-country determinants. The few studies carried out so far have focused on FDI flows in a limited number of countries. However, Spanish FDI outflows have risen dramatically since 1995 and today account for a substantial part of global FDI. Therefore, we estimate recently developed spatial panel data models by maximum likelihood (ML) procedures for Spanish outflows (1993)(1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004) to top-50 host countries. After controlling for unobservable effects, we find that spatial interdependence matters and provide evidence consistent with new economic geography theories of agglomeration, mainly due to complex (vertical) FDI motivations. Spatial error models estimations also provide illuminating results regarding the transmission mechanism of shocks.

Has the crisis affected Spanish investment strategy abroad? A spatial panel data approach

“…Namely, they set up their vertical chain of production by seeking out suppliers in neighbouring countries. These results are in line with those drawn by Martínez‐Martín () for Spanish outward direct investment, but also with those by Garretsen and Peeters () for Dutch outward FDI, and Nwaogu and Ryan () for US outward FDI.…”

“…As expected, the direct effect of GDP always discloses a positive and significant relationship between the market potential of the host country and the investment flows received, which is in agreement with Blonigen et al. (), Garretsen and Peeters () and Martínez‐Martín (). We also find a negative and significant indirect effect for the host population in Equation , which is also in line with previous literature.…”

“…On the other hand, Garretsen and Peeters (), analysing Dutch outward FDI into 18 OECD host countries between 1984 and 2004, and Poelhekke and Van der Ploeg (), using US affiliates’ sales in 76 foreign countries during the period 1984–98, conclude that third‐country effects matter, although in this case they point to agglomeration in FDI. In the same vein, Martínez‐Martín () finds evidence of positive spatial linkages for Spanish outward FDI over the period 1993–2004, and so do Nwaogu and Ryan () for US FDI into Africa, Latin America and the Caribbean over the period 1995–2007. On the contrary, Regelink and Elhorst (), by computing direct and indirect effects of FDI determinants, offer evidence of the existence of competition among European countries when attracting US FDI from 1999 to 2008.…”

On the drivers of UK direct investment in the Spanish regions: A spatial Durbin approach

“…From an empirical point of view, some recent papers address the issue of spatial linkages when it comes to making decisions on FDI location. Using spatial econometric techniques, most of them pay attention to spillovers and/or linkages between countries, namely Blonigen, Davies, Waddell, and Naughton (2007), Baltagi et al (2007), Garretsen and Peeters (2009), Poelhekke and van der Ploeg (2009), Martínez‐Martín (2011), Nwaogu and Ryan (2014), Regelink and Elhorst (2015), Badinger and Egger (2016), Alamá‐Sabater, Heid, Jiménez‐Fernández, and Márquez‐Ramos (2017), Siddiqui and Iqbal (2018), and Gutiérrez‐Portilla, Maza, and Villaverde (2019a). Between these papers, Blonigen et al's stand out as one of the most relevant.…”

Foreign Direct Investment and Emerging Markets: A Study of Direct Investment in Thailand with a focus on Australia Investment

“…The United States of America is one of the biggest investors of FDI in the world. These flows help the underdeveloped countries to grow and prosper [1]. This study aims to demonstrate the general feasibility for Foreign Direct Investment perspective in Thailand.…”