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Does national sentiment affect foreign direct investment, and if so, how? Additional evidence

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  • Li, Megan Yuan
  • Makino, Shige
  • Jiang, Chunyan

Abstract

Studies of foreign direct investment (FDI) decisions typically assume that decision makers and stakeholders act rationally. Drawing on studies conducted at the individual level, this study focuses instead on affect and explores theoretically and empirically how national sentiment influences FDI decisions. In particular, we develop a typology for understanding national sentiment along two axes—positive versus negative and accumulated versus transient—and investigate their separate influences on FDI. The results indicate that negative sentiment has a greater influence on FDI than positive sentiment and that accumulated sentiment has a greater influence than transient sentiment. This study complements conventional FDI research by demonstrating that national sentiment offers additional explanatory power beyond the variables known to influence FDI decisions. Moreover, our study shows that research conducted at the individual level can be useful for understanding the influence of affective elements on FDI decisions.

Suggested Citation

  • Li, Megan Yuan & Makino, Shige & Jiang, Chunyan, 2019. "Does national sentiment affect foreign direct investment, and if so, how? Additional evidence," International Business Review, Elsevier, vol. 28(5), pages 1-1.
    • Handle: RePEc:eee:iburev:v:28:y:2019:i:5:4
    DOI: 10.1016/j.ibusrev.2019.101586
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    2. Zheng, Weiting & Zheng, Yaqin & Yi, Jingtao & Shaheer, Noman & Li, Sali, 2024. "Context matters: The signaling role of foreign bidders’ reputation in cross-border acquisition contests," Journal of World Business, Elsevier, vol. 59(4).
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    4. Hock Tsen Wong, 2022. "Asymmetric Real Exchange Rate and Foreign Direct Investment Determinants: An Empirical Study of Malaysia," Capital Markets Review, Malaysian Finance Association, vol. 30(2), pages 19-37.
    5. Charpin, Remi & London, Jackie & Vincent, Nicolas, 2024. "The effect of geopolitical tensions on international research collaborations and its implications for global operations management," International Journal of Production Economics, Elsevier, vol. 268(C).

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