Faculty Publications

Explaining The Competition For FDI: Evidence From Costa Rica And Cross-National Industry-Level FDI Data

Document Type

Article

Keywords

Foreign direct investment, Investment promotion, Location advantages, Tax incentives

Journal/Book/Conference Title

Research in International Business and Finance

Volume

47

First Page

67

Last Page

77

Abstract

Attracting foreign direct investment (FDI) has become an integral part of the economic development goals of policymakers throughout the world. Previous literature on FDI attractiveness has identified a host of factors that make a country more or less enticing for FDI. Where the literature is less developed is in explaining what occurs when multiple countries are roughly equal across those factors. In this paper, we argue that when several potential host countries (HCs) are on par in attractiveness, a competition arises between them, such that the HC willing to offer the most concessions to the potential foreign investor attracts the investment. We further argue that this competitive relationship holds in some industrial sectors, but not in others, with the difference centered on location constraints. Using both a case study of Costa Rica's investment promotion activities and cross-national industry-level FDI analyses, we find evidence that concessions are greater in the manufacturing sector, where countries are often equally attractive to FDI, but lower in mining, where natural resource endowments determine FDI attractiveness.

Department

Department of Political Science

Department

Department of Management

Original Publication Date

1-1-2019

DOI of published version

10.1016/j.ribaf.2018.07.002

Repository

UNI ScholarWorks, Rod Library, University of Northern Iowa

Language

en

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