Globalization and Outward Foreign Direct Investment

ABSTRACT

While recent research into foreign direct investment (FDI) has focused on examining the importance of institutions, corruption, money laundering, and tax havens, the role of globalization on FDI has not yet been explored. This research investigates the impacts of globalization on outward FDI. We find that both overall globalization and its economic and social dimensions significantly positively influence outward FDI flows. We also demonstrate that beyond the level of globalization, corruption, money laundering, and the status of a country as a tax haven, cross-country similarity also plays an important role. Accordingly, policies specifically designed to increase the transparency of outward FDI flows should be required to address money laundering and the existence of tax havens.

KEY WORDS:

• developed and emerging market OECD economies
• foreign direct investment
• globalization
• knowledge–capital model

JEL CLASSIFICATION NUMBERS:

• C23
• F21
• G38
• K42