The trend of foreign direct investment movement: Did unintended nation brand of legal-families play an instrumental role?

Abstract

Combining the suggestion from Fan (2006) that a nation can have a brand image without deliberating efforts of nation branding and the work from Klerman et. al. (2011) on Colonial History and effects on legal systems, we view that legal-systems could be an unintended nation brand that could instrumentally affect Foreign Direct Investment (FDI) activitives. We classify 193 countries according to their Colonial History or no-Colonial History into 5 legal-families. Applying Generalised Methods of Moments (GMM) on a set of panel data, our empirical evidence shows that legal-families play an instrumental role in explaining FDI activities. The paper opens up a new ground of research on 'unintended' nation brand of which the nation branding literature largely focus on designed-nation-brand, and on FDI area in which we introduce a new determinant in addition to the traditional determinants that have been reported in the FDI literature.

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“…Thus, the main consequences of nation branding are the following concepts: Social concepts include 18 codes, such as: gaining attention, respect and trust of stakeholders (Browning, 2016; Silvanto and Ryan, 2018; Varga, 2013); strong emotional connection with people (Bigi et al , 2011; Che-Ha et al , 2016); a sense of national pride (Chen, 2012; Dzenovska, 2005; Roozen et al , 2017; Widler, 2007); influencing public opinion (Buhmann and Ingenhoff, 2015; Fan, 2008; Lahrech et al , 2020; Yalkin, 2018); encouraging citizens to feel confident in their homeland (Barr, 2012; Tatevossian, 2008; Varga, 2013); and promoting nation identity (Amujo and Otubanjo, 2012; Clancy, 2011; Dinnie et al , 2010; Montanari et al , 2019; Papadopoulos et al , 2016). Economic and financial concepts, with 16 codes, include, among others: economic growth (Browning, 2016; Che-Ha et al , 2016; Edwards and Ramamurthy, 2016; Hassan and Mahrous, 2019; Pamment, 2018); attracting tourists (Amujo and Otubanjo, 2012; Avraham, 2020; Barr, 2012; Lee and Chun, 2017; Papadopoulos et al , 2016; Rojas-Méndez et al , 2015; Yousaf and Huaibin, 2014); attracting investment (Browning, 2016; Fetscherin, 2010; Kalamova and Konrad, 2010; Lahrech et al , 2020; Montanari et al , 2019; Song and Sung, 2013); attracting business (Frig and Sorsa, 2020; Hakala and Lemmetyinen, 2011; Kam and Tse, 2020; Mariutti and Tench, 2015; Roozen et al , 2017); and internal economic stability (Bigi et al , 2011; Hakala et al , 2013; Rawson, 2007). Business concepts comprise 16 codes, such as positive evaluation of products or services from a particular country (Che-Ha et al , 2016; Ishii and Watanabe, 2015; Loo and Davies, 2006; Yalkin, 2018); assisting large national firms in expanding into international markets (Bigi et al , 2011; Lee, 2011; Montanari et al , 2019); helping market natio...…”

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“…Silvanto et al (2015) explain nation branding as a strategy for attracting internationally mobile skilled professionals. Kam and Tse (2018) argue that Colonial History and the related legal systems can form an unintended nation brand which in turn can play an instrumental role in attracting foreign direct investments. Allagui and Al-Najjar (2018) explain the way the UAE used images of the first female air fighter (Emirati Major Mariam Al Mansouri) as she represents a positive face for the young nation, that can convey messages about modernity and social change and bring nation branding.…”

“…Silvanto et al (2015) explain nation branding as a strategy for attracting internationally mobile skilled professionals. Kam and Tse (2018) argue that Colonial History and the related legal systems can form an unintended nation brand which in turn can play an instrumental role in attracting foreign direct investments.…”