endogefreehost

Ekonomickasopis,65,2017,.
3,s.
201–219201EffectsofGlobalizationandCorruptionontheOutwardFDIinOECDCountriestefanBOJNEC*–ImreFERT**1AbstractThepaperinvestigatesimpactsofglobalizationandcorruption-freeontheout-wardforeigndirectinvestment(FDI)for22OECDcountries.
Thebaselinemodelconfirmsthepositivelinkofhomeandhostcountrygrossdomesticproduct(GDP)percapitaandLinder'shypothesis,homeandhostsizeofGDPanditssimilarity,hostagglomerationofmultinationalenterprises,commoncurrencyeuro,andthenegativelinkwithgeographicaldistance.
Theresultsfortheeffectsofglobalizationandcor-ruption-freeontheoutwardFDIaremixed.
Thesignificantpositiveassociationpertainedtohomeandhostcountryeconomicglobalizationisconfirmed,butthesignificantnegativeassociationpertainedtohomeandhostcountysocialglobali-zation.
ThesignificantpositiveassociationofoutwardFDIwiththecorruption-freeinhostcountryandthesignificantnegativeassociationwiththecorruption-freeinhomecountryandforcorruptionsimilaritysuggestFDIoutflowsfromlowcorrup-tion-freehomecountrytohighcorruption-freehostcountry.
ThisfindingimpliesFDIpreferenceforcorruption-freeeconomicallyglobalizedOECDhostcountries.
Keywords:foreigndirectinvestment,globalizationmeasures,corruptionmeasure,hypothesestestingJELClassifications:C23,F21,G38,K42IntroductionDeterminantsofforeigndirectinvestments(FDIs)varywidelyamongdiffer-entstudiesfordifferentcountriesorgroupofcountries(BhaumikandGelb,2005;BojnecandFert,2014;2016).
BaharumshahandAlmasaied(2009),Reiterand*tefanBOJNEC,UniversityofPrimorska,FacultyofManagement,Cankarjeva5,SI-6104Koper,p.
p.
345,Slovenia;e-mail:stefan.
bojnec@fm-kp.
si;stefan.
bojnec@siol.
net**ImreFERT,HungarianAcademyofSciences,InstituteofEconomics,CentreforEconomicandRegionalStudies,Budarsiu.
45,H-1112Budapest,andKaposvarUniversity,Gubas.
40,H-7400,Kaposvar,Hungary;e-mail:ferto.
imre@krtk.
mta.
hu1Theauthorsgratefullyacknowledgetothejournalreviewerforconstructivecommentsandsuggestionsonthepreviousversionofthispaper.
202Steensma(2010),LejkoandBojnec(2012),amongothers,arguethatavastnumberofempiricalstudieshavegivenmixedresultsontherelationshipbetweenFDIandfactorspromotingeconomicdevelopmentandevenfortherelationshipbetweenFDIandeconomicgrowthbyindustrystructureandperformance,technologicalspillovers,andhumancapitaldevelopment.
Amongpossiblereasonsformixedresultsmightbetheuseofinadequateempiricalmethodsfortheuseofpanelstudiesvis-à-viscross-sectionalstudies,thedisregardofseveralfactorsthatareessentialforunderstandingtheroleofFDIindevelopmentintermsofcountrycharacteristicsandpolicies,andthelevelofcorruption(Wu,2006;EggerandWinner,2006;BlackburnandSarmah,2008;Bitzenes,TsitourasandVlschos,2009;Chang,2010;PeytonandBelasen,2012;Randrianarisoaetal.
,2015).
Amongsuchpoliciesarepriceandtradeliberalization,privatizationandrestructuringthathavebeenintro-ducedsincethe1990s(Brada,KutanandYigit,2006;Brada,DrabekandPerez,2012;BradaandTomik,2009).
Brouthers,GaoandMcNicol(2008)arguedonpossibletrade-offsbetweendifferenttypesofFDI:market-seeking,resource--seekingandlabour-seeking.
Market-seekingFDIaimstodirectlyserveahostcountrymarketbysubstitutingexportwithlocalproductionanddistribution(NachumandZaheer,2005;Brouthers,GaoandMcNicol,2008).
Resource-seekingFDIaimstoachievecost-minimizationinahostcountryowingfromlesscostlyorunavailableresourcesinthehomemarket.
Formarket-seekingFDItheadditionalcorruptioncostsmightbeoffsetbyincreasingpricesinmarketsthathavewealthier,lesspricesensitivecustomers.
Ontheotherhand,theadditionalcorruption'scostsmightbenoteasilyoffsetforresource-seekingFDIsuchlabourormaterials.
Whilecorruptionmightnothindermarket-seekingFDI,itmighthinderresource-seekingFDIandmarketattractivenesscannotcompensateforhighcorruptioncosts.
ThemainobjectiveofthispaperistoinvestigatedeterminantsofoutwardFDIatthecountrylevels.
Morespecifically,wefocusontheeffectsofglobalizationandcontrolofcorruptiononoutwardFDIflowusingpaneldatafor22Organisa-tionforEconomicCooperationandDevelopment(OECD-22)countries.
KeycontributionofthepaperisoninvestigationofpossiblepresenceofimportantlinkbetweenglobalizationandcorruptioneffectsandlevelofFDIoutflows.
Therefore,thepaperconcentratesonthefollowingtworesearchquestions:first,doesgreaterglobalizationofhomeandhostcountriesalsoenhancesgreaterout-wardFDIflows,andsecond,doesahomeandhostcountrydegreeofcorruptionislessormoreattractiveforoutwardFDIaftercontrollingforotherdeterminantsofFDIlocationTherestofthepaperisorganizedasfollows.
Thenext,section1presentsliteraturereviewfocusingondeterminantsofoutwardFDIsintheinteractionwithpossibleeffectsofthebaselinemodelexplanatoryvariables,andparticularly203augmentedmodelwithglobalizationanddegreeofcorruptionexplanatoryvaria-bles.
Section2describesmethodologyanddataused.
Section3presentsdescrip-tivestatisticsandcorrelationanalysis.
Section4presentsmaineconometricresultsinthefoursteps:forthebaselinemodelspecificationvariables,augmentedmodelwithglobalizationanddegreeofcorruptionexplanatoryvariablesinthehomecountry,augmentedmodelwithglobalizationandcorruptionexplanatoryvaria-blesinthehostcountry,andaugmentedmodelwithglobalizationanddegreeofcorruptionsimilarityexplanatoryvariablesbetweenthehomeandhostcountries.
Section5derivesmainfindings.
Finally,lastsectionconcludesandprovidespossibledirectionsforresearchinfuture.
1.
LiteratureReviewandHypothesesDevelopmentPreviousresearchidentifiesalargesetofexplanatoryvariableswhichmaybeimportanttoexplainFDIflowswithpolicyimplications(Chakrabarti,2001;BradaandTomik,2009;BlonigenandPiger,2011;zkan-Günay,2011;Eicher,HelfmanandLenkoski,2011;BojnecandFert,2014;2016).
Themodelspeci-ficationofexplanatoryvariablesisusuallybasedondifferenttheoreticalframe-workandpriorempiricalstudiesimplyinguncertaintyonmodelspecifications.
Thegravitymodelshavebecomepopulartoolinempiricalanalysisofinter-nationaltradeandinternationalizationmodelling(AndersonandvanWincoop,2003),includingformodellingofFDIflows(Aggarwal,KearneyandLucey,2012).
WithinthegravityframeworkitisexpectedthatoutwardFDIfromhomecountryisnegativelyassociatedwithgeographicaldistancebetweenthehomeandhostcountriesandpositivelyassociatedwiththeeconomicsizeofthehomeandhostcountries.
TheeconomicsizeofthecountryisoftenmeasuredbythesizeofGDP.
Moreover,theGDPsimilarityisexpectedtoaffectthelevelofFDIflowspositively(BergstrandandEgger,2007).
Laterstudieshaveintroducedsomeadditionaltradecostsvariablestothegra-vitymodelincludinglanguagesimilarity,havingacommonborder,havingafreetradeagreementorhavingdirectaccessiontothesea(Cuervo-Cazurra,2008).
TheattractivenessfortheoutwardFDImightbethepresenceofagglomerationofmultinationalenterprisesinthehostcountries.
ThelattereffectforhostcountryFDIopennessisoftenproxiedbytheratioofinwardFDIflowstothesizeofGDPinhostcountry.
Finally,theroleoftheEuropeanMonetaryUnion(EMU)ontheoutwardFDIisexplainedbytheeurointroductioninsomeoftheEUcountries(Brouwer,PaapandViaene,2008).
Therefore,wesetthefollowingfourhypotheses(H),whichareusedtotestthevalidityofthebaselinemodelspecification:204H1:OutwardFDIfromhometohostcountryispositivelyassociatedwiththeeconomicsizeofthehomeandhostcountry.
H2:OutwardFDIfromhometohostcountryispositivelyassociatedwiththeeconomicsizesimilaritybetweenthehomeandhostcountry.
H3:OutwardFDIfromhometohostcountryispositivelyassociatedwithhomeandhostcountriesproximityincommonborder,language,acommoncurrency,andhostcountryopennesswithagglomerationofmultinationalenterprises.
H4:OutwardFDIfromhometohostcountryisnegativelyassociatedwiththedistancebetweenhomeandhostcountriescapitals,andlandlockedstatusofhomecountry.
TheusualwayforcontrollingincomelevelofhomeandhostcountriesastheirlevelofeconomicdevelopmentincludestheGDPpercapitameasureinthebaselinemodelspecifications.
Asrelevantcontrolvariableinthebaselinere-gressionmodeloftherobustnesscheckhasbeenjustifiedLinderhypothesisforFDI(Fajgelbaum,GrossmanandHelpman,2015).
Itiscapturedbydifferenceinlog-GDPpercapitabetweenhomeandhostcountry.
Therefore,wesetthefollowingadditionaltwohypotheses(H),whichareusedtotestthevalidityofthebaselinemodelspecification:H5:OutwardFDIfromhometohostcountryispositivelyassociatedwiththelevelofeconomicdevelopmentofthehomeandhostcountry.
H6:OutwardFDIfromhometohostcountryispositivelyassociatedwiththedifferenceintheleveleconomicdevelopmentofthehomeandhostcountry.
Inadditiontothesebaselineexplanatoryvariables,thereisagrowingstreamofresearchontheroleofavarietyofglobalizationindicatorsandthecontrolofcorruptionasexplanatoryvariablesforthecomplexrelationshipwiththeoutwardFDI,whichhasgivenmixedresults(Lambsdorff,2003;Mauro,1995;AnokhinandSchulze,2009;Cuervo-Cazurra,2008;Perez,BradaandDrabek,2012).
Whilethecountry'seconomic,socialandpoliticalstabilityandglobalizationlevelcanhaveunambiguouseffectsontheoutwardFDItheycaninassociationwithcorruption-freeenablingenvironmentencourageoutwardFDIflowsfromhometohostcountry(Desai,1997;TulugOk,2004;Brada,KutanandYigit,2006;Nakamura,OlssonandLonnborg,2012;BojnecandFert,2016).
However,theglobalizationcanhavepositiveeffectsoneconomicgrowthincountrieswithaweakinstitutionsandhigherdegreeofcorruption,andviceversaintheothers(Houston,2007;Jiménez,2011).
Inrelationstolevelofglobalization,wesettheH7inthefollowingway:H7:OutwardFDIfromhometohostcountryispositivelyassociatedwithhomeandhostcountriesglobalization.
205Thetheoreticaljustificationofanexpectedpositivelinkbetweenlevelofcor-ruption-free,positivelinkbetweencorruption-freesimilarityandunambiguouslinkbetweenglobalizationandsizeofFDIoutwardcanbeexplainedbytheeffectsofinstitutionalqualityondecisionmakingprocessofafirm(Chang,2015)andpre-viousempiricalstudiesfocusingspecificallyoncorruptionaspartofinstitutionalsettinginhomeandhostcountriesandglobalizationaspectsofFDIflows.
Countrieswithbetterinstitutionsandcorruption-freearemorelikelytoattractmorepercapitaFDIthanacountrywithpoorinstitutionsandimportantcorruption(Stoian,2013).
Corruptionincreasesagencyandtransactionscosts,anderodesthepotentialvalueofthereturnsoftheopportunity,whilethecontrolofcorruptionandgreatertrans-parencymightincreasethelikelihoodthatprospectiveentrepreneurorinnovatormightbeabletoachievehigherlevelsofentrepreneurialandinnovativeactivity(LaffontandTirole,1993;DrabekandWarren,2002;Cuervo-Cazurra,2008;AnokhinandSchulze,2009;PavelandRistiová,2015).
ThedegreeofcorruptioninhomeandhostcountrieshasbeenspecifiedasanadditionalfactoramongthedeterminantsofFDIlocation.
Corruptionaspayingbribestocorruptgovernmentbureaucratsinreturnforsomegainsisgenerallyviewedasanadditionalcostofdoingbusinessorataxonprofits,whichdecreasestheexpectedprofitabilityofinvestmentprojects(Al-Sadig,2009).
TheempiricalliteratureontheeffectsofthehomeandhostcountriesdegreeofcorruptiononoutwardFDIflowshasfoundthemixedresultsofalinkbetweenacomplexphenomenonofdegreeofcorruptionandoutwardFDIflows(Perez,BradaandDrabek,2012).
Corruptionmightbeacon-sequenceofeconomicandnoneconomicvariablesandthustreatedasanendoge-nousvariable.
Institutionalqualityanddegreeofcorruptionhavebeendefinedindifferentways.
Thedegreeofcorruptioncannegativelyaffectthecostsofinvestmentoperationandcostsofdoingbusiness(Mauro,1995).
TherelationshipbetweendegreeofcorruptionandFDIcanbeofamixedsignorinsignificantinaspiteofgeneralbelievethatthedegreeofcorruptionisinverselyassociatedwithpercapitaFDIflowsandthatcountrieswithalowdegreeofcorruptionattractmorepercapitaFDI(AbedandDavoodi,2000;Akay,2001;Al-Sadig,2009).
WesettheH8inrelationtothedegreeofcorruption-freeinthefollowingway:H8:OutwardFDIfromhometohostcountryispositivelyassociatedwithhomeandhostcountrieslevelofcorruption-free.
Asameasureofcorruption-freeisscaledinversely,apositivesignofassoci-ationbetweenoutwardFDIfromhometohostcountrywiththelevelofcorrup-tion-freeisexpected:morecorruption-freeisacountry,agreaterFDIflowsareexpected.
BecauseweanalysedevelopedOECDcountries,wealsoexpectthathostcountrycorruption-freeencouragesinwardFDIsintohostcountryoroutwardFDIfromhometohostcountry.
Ontheotherhand,importantdeterminantforFDI206flowscanbealsohomeandhostcountriesglobalizationanddegreeofcorruptionsimilarityattheirdifferentglobalizationanddegreeofcorruptionlevels.
HabibandZurawicki(2002)suggestedthatthegreatertheabsolutedifferenceinthedegreeofcorruptionbetweenthehomeandhostcountries,thesmallertheFDIinflowsforthehostcountry.
ThissuggestsontheimportanceofglobalizationanddegreeofcorruptionsimilarityinabsolutedifferencebetweentheglobalizationanddegreeofcorruptioninthehomeandthehostcountriesforbilateralFDIflows.
Therefore,wesetthefollowingH9andH10:H9:OutwardFDIispositivelyassociatedwithhomeandhostcountrieslevelofglobalizationsimilarity.
H10:OutwardFDIispositivelyassociatedwithhomeandhostcountrydegreeofcorruption-freesimilarity.
Thedegreeofcorruptionmightbecorrelatedwithothercountrycharacteristicssuchasthelevelofeconomicdevelopment,qualityofinstitutions,lackofcom-petition,andculturalvalues.
Ontheotherhand,thecorruption-freesimilaritymightalsoencourageoutwardFDIinawaythatcorruptcountriestendtoattractFDIfromothercorruptcountries,andlesscorruptcountriestendtoattractFDIfromlesscorruptcountries(HellmanandKaufmann,2004;Cuervo-Cazurra,2008;Perez,BradaandDrabek,2012).
2.
MethodologyandDataThereisnoagreementbetweenscholarshowtoestimateempiricallybilateralFDIflows(SarisoyGuerin,2006;LaneandMilesi-Ferretti,2008;DaudeandFratzscher,2008).
Standardapproachistheapplicationofgravitytype'smodel(Aggarwal,KearneyandLucey,2012).
BergstrandandEgger(2007)providetheoreticalfoundationfortheuseofgravitymodeltoanalyzeFDIpatterns.
InthispaperweemploythefollowingbaselineversionofFDImodel:outwardFDIijt=α0+α1lnGDP/capitait+α2lnGDP/capitajt++α3lnGDP/capitaijtdifference+α4lnGDPit+α5lnGDPjt+α6lnGDPijtsimilarity++α7lnOpennessjt+α8lnDistanceij+α9Landlockedi+α10Commonborderij++α11Languageij+α12Euroijt+εijt(1)whereFDI–levelofabilateralFDIflowsbetweenhomeiandhostjcountriesattimet,GDPpercapitaiandGDPpercapitaj–levelofeconomicdevelopmentofhomeiandhostjcountries,GDPiandGDPj–marketsizeofhomeiandhostjcountries,GDPpercapitaijdifference–thedifferencebetweenthelnGDPpercapitavaluesforhomeiandhostjcountries.
207TheGDPsimilarityismeasuredas2ijijGDPGDPGDPGDP+(BergstrandandEgger,2007).
TheOpennessjmeasurestheagglomerationeffectofmultinationalenter-prises,whichisdefinedbyinwardFDI/GDPjinhostcountryj.
Tradecostsvari-ablesare:Distanceforthebilateraldistancebetweenpartners,andfourdummyvariablesincludingLandlockedifhomecountryiisalandlockingcountry,Commonborderifhomeandhostcountrieshaveacommonborder,Languageifthecommonlanguageisusedinhomeandhostcountries,andEuroifbothhomeandhostcountriesarememberofEuroareaattimet.
Finally,εijtistheerrorterm.
ThebilateralFDIdata,GDPpercapitadataandGDPdataareexpressedinU.
S.
dollarsandbasedontheOECDInternationalDirectInvestmentStatisticsandOECDMainEconomicIndicators.
TradecostsvariablesareobtainedfromCEPIIdatabase.
Sinceourinterestfocusesonthepotentialimpactofglobalizationandcorrup-tion-freeonoutwardFDIflowsweaugmentthebaselinemodelinequation(1)withproxiesforexplanatoryglobalizationandcorruption-freevariables.
WeapplyKOFIndexofGlobalization(http://globalization.
kof.
ethz.
ch/),whichmea-suresthethreemaindimensionsofglobalization:economic,socialandpolitical(Dreher,2006).
Highervalueofindicesimplieshigherlevelofglobalization.
Finally,tomeasureofthedegreeofcorruptionweusetheCorruptionPerceptionsIndex(CPI)fromtheTransparencyInternational(Lambsdorff,2000).
TheCorruptionPerceptionsIndexasanaggregateindicatorcomparesandrankscountriesandterritoriesaccordingtotheirperceivedlevelsofpublicsectorcorruption.
TheCorruptionPer-ceptionsIndexrangesbetween10(highlycorruption-free)and0(highlycorrupt).
Theaugmentedmodelforhomecountryiisdefinedasfollows:outwardFDIijt=α0+α1lnGDP/capitait+α2lnGDP/capitajt++α3lnGDP/capitaijtdifference+α4lnGDPit+α5lnGDPjt+α6lnGDPijtsimilarity++α7lnOpennessjt+α8lnDistanceij+α9Landlockedi+α10Commonborderij++α11Languageij+α12Euroijt+α13EconomicGlobalizationit+α14SocialGlobalizationit++α15PoliticalGlobalizationit+α16Corruption-freeit+εijt(2)whereareaddedvariouselementsofglobalizationandcorruption-freeperceptionindicesofhomecountryi.
Inaddition,toincludevariouselementsofglobalizationandcorruption-freeperceptionindicesalsoofhostjcountry,theaugmentedmodelspecificationwiththehostcountryglobalizationandcorruption-freecharacteristicsisthefollowing:208outwardFDIijt=α0+α1lnGDP/capitait+α2lnGDP/capitajt++α3lnGDP/capitaijtdifference+α4lnGDPit+α5lnGDPjt+α6lnGDPijtsimilarity++α7lnOpennessjt+α8lnDistanceij+α9Landlockedi+α10Commonborderij++α11Languageij+α12Euroijt+α13EconomicGlobalizationjt+α14SocialGlobalizationjt++α15PoliticalGlobalizationjt+α16Corruption-freejt+εijt(3)Finally,theaugmentedmodelspecificationwiththehomeandhostcountriesglobalizationanddegreeofcorruptionsimilarityisspecifiedinthefollowingway:outwardFDIijt=α0+α1lnGDP/capitait+α2lnGDP/capitajt++α3lnGDP/capitaijtdifference+α4lnGDPit+α5lnGDPjt+6lnGDPijtsimilarity++α7lnOpennessjt+α8lnDistanceij+α9Landlockedi+α10Commonborderij++α11Languageij+α12Euroijt+α13EconomicGlobalizationSimilarityijt++α14SocialGlobalizationSimilarityijt+α15PoliticalGlobalizationsimilarityijt++α16Corruption-freesimilarityijt+εijt(4)TheeconometricmodelisspecifiedwiththesimilarityintheglobalizationandcorruptionvariablesbythebilateralpairsoftheOECD-22countries.
Theglob-alizationanddegreeofcorruptionsimilarityisdefinedonthebasisoftheabsolutedifferencebetweenthehomeandhostcountryvariables,e.
g.
,separatelyforthreedifferentglobalizationmeasuresandfordegreeofcorruptionvariable.
Thecom-putationofthemeasureofsimilaritybetweenhomeandhostcountriesusesabsolutedifference(e.
g.
CezarandEscobar,2015).
ThedatausedcoverstheOECD-22:Austria,Belgium,theCzechRepublic,Den-mark,Finland,France,Germany,Greece,Hungary,Ireland,Italy,Luxembourg,theNetherlands,Norway,Poland,Portugal,Slovakia,Spain,Sweden,Switzerland,Turkey,andtheUnitedKingdom.
ExceptforNorway,SwitzerlandandTurkey,thesearetheEuropeanUnion(EU)OECDcountries.
Fourofthem–theCzechRepublic,Hungary,PolandandSlovakia–arefromCentralEuropeanVisegrádregion(RadloandSass,2012).
Theanalysedperiodisbetween2004and2008,whichpartlycoversthebe-ginningofthemostrecentfinancialandeconomiccrisis.
Therelativeshort5-yearstimespanturnstheanalysisintomorecross-sectionaloriented,ratherthananinvestigationofanatureofdynamicunderlyingprocesses(e.
g.
Skabic,2015;Podda,2016).
Duetocross-sectionaldependencethebaselineandaugmentedmodelsareestimatedbythepanel-correctedstandarderrormodels.
3.
DescriptiveStatisticsandCorrelationAnalysisTable1presentssummarystatisticsoftherestricteddata-sampleforthetime--variantandtime-invariantspecifiedvariables,whichareusedintheeconometricanalysis.
Thenumberofobservations(2310=462x5years,where462=22209countriesx21variables)isforabalancedpanel.
Inthecaseoftime-invariantvariablestheconstantvaluesaretakenforeachoftheanalysedyears.
AtthefirstglancethemostconsiderabledifferencesbetweentheanalysedOECD-22countriesandovertheanalysedyearsareseenfromthedifferentialbetweenminimumandmaximumvaluesfortheoutwardFDIandthemeasureofdegreeofcorruption.
DifferencesbetweenthecountriesarealsointhecaseofGDPpercapitaaslevelofeconomicdevelopmentandGDPasthesizeoftheeconomy.
Inaddition,anativetaughtLanguagesimilaritybetweentheOECD-22countriesislowerthanthenumberofLandlockedcountries(Austria,theCzechRepublic,Hungary,Luxembourg,Slovakia,andSwitzerland)ortheEurocoun-tries.
DegreeofSocialGlobalizationisaslightlylowerthanEconomicGlobali-zationandlowerthanPoliticalGlobalization.
Table1SummaryStatisticsofVariablesVariableNumberofobservationsMeanvalueStd.
dev.
MinimumMaximumOutwardFDIij23101290.
305534.
50–48323.
30106849.
40lnGDP/capitai231010.
290.
419.
2311.
35lnGDP/capitaijdifference23100.
450.
360.
0011.
86lnGDPi23105.
961.
073.
397.
98lnGDPsimilarityij23100.
170.
070.
010.
25lnOpennesj23100.
440.
51–0.
471.
80lnDistanceij23107.
000.
664.
098.
12Landlockedi23100.
270.
4501Commonborderij23100.
140.
3401Languageij23100.
080.
2601Euroij23100.
290.
4501Economicglobalizationi231083.
318.
2054.
2598.
69Socialglobalizationi231082.
548.
3748.
3294.
58Politicalglobalizationi231090.
987.
5960.
2098.
43Corruption-freei23107.
031.
923.
029.
07Economicglobalizationsimilarityij23109.
167.
500.
0338.
86Socialglobalizationsimilarityij23108.
348.
760.
0044.
77Politicalglobalizationsimilarityij23107.
178.
160.
0337.
14Corruption-freesimilarityij23102.
251.
6306.
50Source:Owncalculations.
Figure1presentsthecross-countrymeanvaluesover5yearsofindicesofEconomic,SocialandPoliticalGlobalizations,whereGlobalizationindicesaresortbyEconomicGlobalizationindices.
Theresultsconfirmeddifferentialsbe-tweentheanalysedOECD-22countries.
Thelowervalueimplieslowerlevelofglobalization.
EconomicandSocialGlobalizationisthelowestforTurkey.
Po-liticalGlobalizationisonaveragehigher:itisthelowestfortheUnitedKingdomandparticularlyishighforFranceandAustria.
EconomicGlobalizationisthehighestforLuxembourgandSocialGlobalizationforSwitzerland.
210Figure1TheMeanValuesofGlobalizationandDegreeofCorruptionPerceptionIndices,2004–2008Source:Owncalculations.
Highervalueofglobalizationindicesanddegreeofcorruptionimplieshigherlevelofglobalizationandhigherdegreeofcorruption-free.
NoneoftheanalysedOECD-22countriesishighlycorrupt,butrelativelymorecorruptionisidentifiedinTurkey,Greece,Italy,Polandandotherpost-communistanalysedOECDcountries(Slovakia,theCzechRepublicandHungary).
ThisfindingisconsistentwithPavelandRistiová(2015).
Ontheotherhand,morecorruption-freeareforFinland,Denmark,SwedenandSwitzerland.
Thecorrelationanalysisbasedfromapooleddataconfirmedmodestcorrelationbetweentheanalysedpairsofvaria-bles(Table2).
Thepartialcorrelationcoefficientsaregreaterorcloseto0.
5be-tweenthefollowingpairsofvariables:positivecorrelationsbetweenlnGDPpercapitaanddegreeofCorruption-free,lnGDPofhomecountryandCorruption--freesimilarity,EconomicandSocialGlobalization,degreeofCorruption-freeandEconomicGlobalization,degreeofCorruption-freeandSocialGlobalization,lnGDPpercapitaandEconomicGlobalization,lnGDPpercapitaandSocialGlobalization,CommonborderandLanguage;negativecorrelationsbetweenlnGDPofhomecountryanditsLandlockedstatus,lnGDPofhomecountryandEconomicGlobalization,lnDistanceandCommonborder,SocialGlobalizationofhomecountryandSocialGlobalizationsimilarity,PoliticalGlobalizationofhomecountryandPoliticalGlobalizationsimilarity.
211Table2CorrelationCoefficientsbetweenPairsofVariablesBasedfromPooledDataoutwardFDIijlnGDP/capitailnGDP/capitaijsimilaritylnGDPilnGDPsimilarityijlnOpennesjlnDistanceijLandlockediCommonborderijLanguageijEuroijEconomicglobalizationiSocialglobalizationiPoliticalglobalizationiCorruption--freeiOutwardFDIij1.
00lnGDP/capitai0.
121.
00lnGDP/capitaijdifference–0.
06–0.
111.
00lnGDPi0.
11–0.
20–0.
231.
00lnGDPsimilarityij–0.
08–0.
13–0.
12–0.
111.
00lnOpennesj0.
050.
050.
140.
060.
0031.
00lnDistanceij–0.
22–0.
140.
130.
030.
11–0.
251.
00Landlockedi–0.
030.
020.
16–0.
54–0.
03–0.
03–0.
241.
00Commonborderij0.
130.
03–0.
08–0.
150.
070.
04–0.
610.
071.
00Languageij0.
160.
15–0.
14–0.
002–0.
130.
09–0.
450.
100.
551.
00Euroij0.
100.
23–0.
260.
01–0.
100.
010.
01–0.
150.
070.
161.
00Economicglobalizationi0.
050.
53–0.
15–0.
49–0.
01–0.
04–0.
240.
340.
340.
120.
191.
00Socialglobalizationi0.
060.
53–0.
32–0.
090.
02–0.
02–0.
260.
220.
220.
160.
090.
681.
00Politicalglobalizationi–0.
03–0.
25–0.
240.
320.
260.
060.
09–0.
29–0.
29–0.
010.
10–0.
230.
041.
00Corruption-freei0.
060.
77–0.
22–0.
09–0.
02–0.
00–0.
12–0.
10–0.
100.
130.
160.
530.
66–0.
071.
00Economicglobalizationijsimilarity–0.
04–0.
19–0.
110.
430.
05–0.
110.
25–0.
12–0.
12–0.
10–0.
07–0.
35–0.
47–0.
03–0.
25Socialglobalizationijsimilarity–0.
07–0.
270.
110.
370.
09–0.
190.
260.
06–0.
10–0.
09–0.
12–0.
42–0.
490.
06–0.
25PoliticalGlobalizationijsimilarity0.
100.
22–0.
410.
24–0.
180.
10–0.
200.
15–0.
020.
07–0.
010.
170.
05–0.
580.
10Corruption-freeijsimilarity0.
13–0.
230.
110.
53–0.
04–0.
090.
310.
01–0.
18–0.
21–0.
17–0.
17–0.
190.
02–0.
19Source:Owncalculations.
2124.
EconometricResultsTheeconometricresultsarepresentedinfourstepsfrombaselinemodel,augmentedmodelwithglobalizationandcorruption-freeregressorsforthehomecountry,augmentedmodelwithglobalizationandcorruption-freeregressorsforthehostcountry,andmodelwithglobalizationandcorruptionsimilarity.
4.
1.
BaselineModelTable3BaselineandAugmentedModelsforOutwardFDIijVariable(1)(2)(3)(4)lnGDP/capitai1.
190***1.
653***1.
281***1.
030***lnGDP/capitaj1.
052***1.
086***0.
5680.
887***lnGDP/capitaijdifference0.
995***0.
893***1.
001***1.
183***lnGDPi0.
670***0.
823***0.
692***0.
705***lnGDPj0.
640***0.
644***0.
789***0.
679***lnGDPsimilarityij1.
6302.
480*2.
5233.
389**lnOpennesj0.
281*0.
303*0.
1240.
307**lnDistanceij–1.
394***–1.
322***–1.
352***–1.
249***Commonborderij–0.
684*–0.
623*–0.
602*–0.
569Languageij1.
0201.
1061.
0681.
043Landlocki0.
000–0.
1470.
0240.
021Euroij0.
627***0.
501**0.
568***0.
669***Economicglobalizationi0.
045***Socialglobalizationi–0.
019*Politicalglobalizationi–0.
014Corruption-freei–0.
182***Economicglobalizationj0.
049**Socialglobalizationj–0.
039***Politicalglobalizationj–0.
024Corruption-freej0.
123***Economicglobalizationsimilarityij0.
010Socialglobalizationsimilarityij–0.
010Politicalglobalizationsimilarityij0.
026Corruptionsimilarityij–0.
121***Constant–21.
140***–27.
405***–18.
060***–19.
603***N2310231023102310R20.
1090.
1140.
1150.
113Note:Levelofsignificance:***1%,**5%and*10%.
Source:Ownestimations.
Regressionequation(1)inTable3presentstheestimatedeconometricresultsofthebaselinemodelfortheoutwardFDI.
TheoutwardFDIissignificantlypositivelyassociatedwithhostandhomecountryGDPpercapitaaswellaswiththeirGDPpercapitadifference.
ThelatterconfirmedthevalidityofLinderhy-pothesis.
TheregressioncoefficientswerefoundtobesignificantlypositivelyassociatedforthehomeandhostGDPs,butnotsignificantfortheirGDPsimi-larity.
Inaddition,theregressioncoefficientissignificantlypositivefortheEuroadoptionsimilarityandtoalesserextentforthehostcountryOpenness,butnot213significantfortheLanguagesimilaritybetweenthepairsoftheOECD-22coun-tries.
Ontheotherhand,theoutwardFDIwerefoundtobesignificantlynegativelyassociatedwiththegeographicalDistancebetweenthecapitalsintheOECD-22countriesandtoalesserextentforCommonborder,butinsignificantfortheLandlockedgeographicalhomecountryposition.
TheseresultsareconsistentwiththesetofH1,H4,H5,H6andpartlyH3,butnotwiththeH2.
4.
2.
AugmentedModelwithGlobalizationandCorruption-freeRegressorsfortheHomeCountryInregressionequation(2)inTable3thebaselinemodelvariablesbythesignsandstatisticalsignificanceremainedratherstableandthusrobustintheaug-mentedspecifiedmodelswiththeglobalizationandcorruption-freeregressorsforthehomecountry.
TheregressioncoefficientforhomecountryGDPpercapitaishigherthanforhostcountryGDPpercapitaandtheregressioncoefficientforGDPsimilarityhasbecomesignificantat10%significancelevel.
Regardinghostcountryglobalizationandcorruption-freeexplanatoryvaria-bles,theoutwardFDIwerefoundtobesignificantlypositivelyassociatedwiththeEconomicGlobalizationinthehomecountryandsignificantlynegativelyasso-ciatedwiththeCorruption-freeandtoalesserextentwithSocialGlobalizationinthehomecountry,butstatisticallynotsignificantwithPoliticalGlobalizationinthehomecountry.
ThegreaterEconomicGlobalizationinthehomeOECD-22countries,thegreateristheoutwardFDIfromhometohostOECD-22countries.
ThislatterfindingsupportstheoutwardFDIflowsfrommoreeconomicallyglobalizedhometohostOECD-22countries,whichisconsistentwiththesetH7.
Onthecontrarytoourexpectations,corruption-freediscouragesoutwardFDIfromhomecountry.
4.
3.
AugmentedModelwithGlobalizationandCorruption-freeRegressorsfortheHostCountryWhentheeconometricmodelisspecifiedforregressorsfortheglobalizationandcorruption-freeinthehostcountryinregressionequation(3)inTable3,amongthebaselinemodelvariablesapositiveassociationfortheGDPpercapitaisfoundinsignificant.
StatisticallyinsignificantisalsotheregressioncoefficientforGDPsimilarityandthehostcountryOpenness,whiletheEuroadoptionex-planatoryvariableishighlysignificant.
Ourspecificinterestistoinvestigatetheglobalizationandcorruption-freeauxiliaryregressorsforthehostcountry.
TheeconometricresultsconfirmedthattheoutwardFDIwassignificantlypositivelyassociatedwithEconomicGlobalization214andCorruption-freeinthehostcountry,butsignificantlynegativelyassociatedwithSocialGlobalizationinthehostcountryandinsignificantwiththePoliticalGlobalizationinthehostcountry.
TheseresultsareconsistentwiththeH8,butonlypartlyconfirmedtheH7.
TheseresultsimplythattheoutwardFDIwereconstrainedanddiscouragedbysocialglobalizationandlikelypoliticalglobali-zationinthehostcountry.
Asexpected,economicglobalizationandcorrup-tion-freeinthehostcountryencouragedtheoutwardFDIfromthehometothehostOECD-22country.
4.
4.
ModelwithGlobalizationandCorruptionSimilarityAscanbeseenfromequation(4)inTable3,thebaselinemodelspecificationvariablesremainedconsistentlyrobustbytheregressioncoefficientssignsandtheirstatisticalsignificance:significantlypositivesignforhomeandhostcountryGDPpercapitaandtheirdifference,thesizeofhomeandhostcountryGDPandtheirsimilarity,hostcountryFDIopennessandtheEuroadoptionhavesignifi-cantlypositivesign,butsignificantlynegativesignforDistance.
TheregressioncoefficientsforCommonborderandotherproximityvariablesareinsignificant.
AmongtheOECD-22bilateralcountries,theoutwardFDIwerenotfoundtobesignificantlycorrelatedwithEconomic,SocialandPoliticalGlobalizationsimilarities.
TheregressioncoefficientthatispertainedtoCorruptionsimilaritywasfoundofasignificantlynegativesign.
TheseresultsareinconsistentwiththesetofH9andH10astheoutwardFDIwerefoundeithernotsignificantcorrelatedorinthecaseoftheCorruption-freesimilaritysignificant,butoppositesign.
5.
FindingsThepaperhasinvestigateddeterminantsoftheoutwardFDIbyusingthepanelcorrectedstandarderrormodelfortheOECD-22countries.
TheagglomerationeffectiscontrolledbytheratioofinwardFDItoGDPaseconomicsizeofthecountry.
Thestudycontributestotheempiricalliteratureanalysingpotentialdetermi-nantsofoutwardFDIindevelopedanddevelopingcountries.
Thepaperprovidesevidenceoflinkbetweenglobalization,corruption-freeanditslevelofsimilarityamongthemandoutwardFDIflows.
ItconfirmsthepresenceofstatisticallysignificantpositiveassociationbetweeneconomicaspectofglobalizationinhomeandhostcountryandoutwardFDIflowsononehand,andbetweenFDIoutflowsfromlowcorruption-freehomecountrytohighcorruption-freehostcountry.
215AmongthebaselinecontrolvariablesturnedouttobestatisticallysignificantthepositiveassociationsignoftheoutwardFDIwithrespecttohomeandhostcountryGDPpercapitaandtheirdifference,homeandhostcountryGDPandtoalesserextenttheirsimilarity,theEuroadoptionandthehostcountryopennesswiththeinwardFDI/GDPratio,butwithasignificantnegativeassociationsignoftheoutwardFDIwithrespecttothegeographicaldistancebetweenthecountriescapitalsandtoalesserextentforCommonborder.
Notsignificantarefoundregressioncoefficientsforlanguageproximityandbeinglandlockedcountry.
TheresultsandfindingsonpositiveassociationsbetweenhomeandhostcountryGDPpercapitaandtheirdifferencewithoutwardFDIareconsistentwiththetheoreticalexpectationsandsethypotheses5and6andtheLinder'shypoth-esis.
TheanalysedOECD-22countriesarerankedamongthemosteconomicallydevelopedcountriesbyGDPpercapitaintheworld.
Consistentwithsethypotheses1and2isthefindingthattheeconomicsizeinhomeandhostcountriesandtheirsimilarityincreasetheoutwardFDIowingfrombothsupplyanddemandsidefactors.
Onsupplysideoneofmodesofinterna-tionalizationofenterpriseswithoveralleconomicgrowthinhomecountriesaretheiroutwardFDI,whilegrowthofGDPinhostcountryondemandsideprovidesopportunitiesforagreaterpresenceofinwardFDIinGDPinhostcountryowingfromtheincreaseofthemarketsize.
Asinteresting,theregressioncoefficientsforhomecountryGDParegreaterthanforhostcountryGDPsuggestingacrucialroleofhomemarketsizeforoutwardFDI.
Consistentwithsethypothesis3isfindingthatfavourableinvestmentclimateconditionscanbestrengthenedbyhostcountryFDIopennesswithincreasingagglomerationofmultinationalenterprisesandtheEuroadoption,whichhassimplifiedfinancialtransactionsbetweentheirmembersbyovercomingtheexchangeraterisksowingfromnationalbanks'monetaryandexchangeratepolicies.
AsignificantnegativeassociationbetweentheoutwardFDIandthegeo-graphicaldistancebetweenthehomeandhostcountriescapitalsisconsistentwiththetheoreticalexpectationsandsethypotheses4.
OurspecificfocushasbeenonoutwardFDIandglobalizationandcorrup-tion-freevariables.
Theyturnedouttobestatisticallysignificantpositiveonlywithrespecttothehomeandhostcountryeconomicglobalizationandhostcountrycorruption-free.
Thebilateralpartners'countrieswithhighlevelofeco-nomicglobalizationhaveexperiencedanimportantrolefortheFDIflows.
TheanalysedOECD-22countrieshavecreatedanenvironmentandgovernmentpolicyinfavourofgreaterlevelofeconomicglobalizationwitheasieraccessforforeigninvestorstoenterinmoreeconomicsectorsandestablishoperationswithremo-vingrestrictionsonforeignequityparticipationandownershipbydiscriminating216againstforeigninvestorsinfavourofdomesticones.
Thisfindingforhomeandhostcountryeconomicglobalizationisconsistentwiththesethypotheses7.
Strikingfindingissignificantpositiveregressioncoefficientforhostcountrycorruption-freeandsignificantnegativeregressioncoefficientsforhomecountrycorruption-freeandcorruptionsimilaritybetweenhomeandhostcountries.
Theinverserelationbetweenhomecountrycorruption-freeandoutwardFDIsuggestoutflowsofFDIfrommoretolesscorruptedOECDcountries.
ThisfindingisalsosupportedwithsignificantnegativeassociationbetweencorruptionsimilarityandtheoutwardFDI.
Therefore,thecorruption-freeinhostcountrywithreliableinstitutionalframeworkisfoundtobeanimportantpullfactorfortheoutwardFDIflowsfromlesscorruption-freehomecountrytomorecorruption-freehostOECD-22bilateralcountry.
Thisfindingforhostcountrycorruption-freeiscon-sistentwiththesethypotheses8,butnotforhomecountryandhostcountrycor-ruptionsimilarity.
Thisfindingsuggeststhatthequalityofgovernance,includingthecontrolofcorruptioninhostcountryhasplayedanimportantfactorinstrengtheningtheoutwardFDIacrosstheOECD-22countries.
Itisworthmen-tioningthatmostOECD-22countriesbythedegreeofcorruption-freearerankedhigherthanmostothercountriesintheworld.
Inadditiontosignificantnegativeassociationforlevelofhomecountrycor-ruption-free,amongunexpectedresultsaresignificantnegativeassociationsofoutwardFDIwithhomeandhostcountrysocialglobalization.
HomeandhostcountrypoliticalglobalizationanditssimilarityarenotfoundsignificantdriverfortheoutwardFDI.
Furtherinvestigationwouldrequirecounter-intuitivesig-nificantnegativeregressioncoefficientsforhomeandhostcountrysocialglob-alizationandinsignificantregressioncoefficientforitssimilarity.
ConclusionThepapercontributestotheempiricalanalysisofrelevantdeterminantsofoutwardFDI.
ThekeycontributionistotestinghypothesesoneitherconfirmorrejectpresenceofimportantlinkbetweencorruptionandglobalizationeffectsandlevelofoutwardFDI.
TheresultsforthebaselinemodelconfirmedthepositivelinkofhomeandhostcountryGDPpercapitaandLinder'shypothesis,homeandhostcountrysizeofGDPanditssimilarity,hostcountryagglomerationofmulti-nationalenterprises,commoncurrencyeuro,andthenegativelinkwithgeograp-hicaldistance.
Homeandhostcountryeconomicglobalizationlevelsstrength-ened,whilehomeandhostcountrysocialglobalizationlevelsweakenedtheoutwardFDIflowsbetweentheOECD-22countries.
ThecontrolofdegreeofcorruptioninhostcountryhasapositiveeffectonoutwardFDIfromhometohost217country.
ThisrelationisnegativeinhomecountryandforthesimilarityinthedegreeofcorruptionbetweenhomeandhostOECD-22countries.
TheempiricalresultssuggestFDIoutflowsfromlesscorruption-freehomecountrytomorecorruption-freehostOECDcountrywithclearFDIpreferenceforcorruption-freeeconomicallyglobalizedOECDhostcountries.
Amonglimitationsistherelativeshort5-yearstimespanoftheanalysisanddecisiontousethestaticcross-sectionalorientedpanelmodelratherthandynamicpanelmodelsetup.
Finally,amongissuesforfutureresearchistostudytheout-wardFDIflowsinassociationwiththemostrecentfinancialanddebtcrisisandtoup-datethetimedimensionofthepaneldatasampleoveratleast10yearstoallowforatimedynamicpanelestimationapproaches.
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