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Do international flights promote FDI? The role of face‐to‐face communication
Author(s) -
Tanaka Kiyoyasu
Publication year - 2019
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12437
Subject(s) - multinational corporation , foreign direct investment , proxy (statistics) , expatriate , face (sociological concept) , business , international trade , r&d intensity , channel (broadcasting) , economics , international economics , political science , computer science , finance , management , telecommunications , macroeconomics , sociology , social science , machine learning , law
International passenger flights facilitate business travel for in‐person meetings abroad. However, the significance of face‐to‐face communication (FFC) is not clear. To identify the FFC channel, this paper examines whether flights promote FDI more strongly for multinational firms that face relatively intensive FFC in foreign production. Expatriate employees are used as a proxy for the FFC intensity. Using firm‐level data on Japanese multinational firms for the period 1989 to 2006, I show that more frequent flights increase new FDI entry, with the larger positive effects for multinationals in high FFC sectors. The results support the FFC channel to connect flights and FDI.