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Regional headquarters and foreign direct investment
Author(s) -
GilPareja Salvador,
LlorcaVivero Rafael,
Paniagua Jordi
Publication year - 2022
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.12605
Subject(s) - foreign direct investment , endogeneity , investment (military) , economics , international economics , capital (architecture) , monetary economics , macroeconomics , econometrics , geography , political science , archaeology , politics , law
Headquarters (HQs) provide a wide range of services, playing a fundamental role in Foreign Direct Investment (FDI). We use the structural gravity equation to investigate the effect of regional HQs on three dimensions of FDI (number of foreign projects, capital investment, and jobs) at the country‐pair‐sector level. Furthermore, we explore two underlying mechanisms that help explain this relationship: financial constraints and informational costs and uncertainty. We find a positive effect of regional HQs on FDI, as well as intercountry and intersector spillovers. Our results are robust, accounting for HQ intensity, domestic investment, and endogeneity tests.