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The role of psychic distance stimuli on the East-West FDI location structure in the EU. Evidence from Spanish MNEs

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  • Palmero, Alfredo Jiménez
  • Herrera, Juan José Durán
  • Sabaté, Juan Manuel de la Fuente

Abstract

Eastern Europe nowadays represents an important and attractive economic area for foreign direct investment. Determinants of investments have converged with those of other European countries. However, it has been argued that a differentiated East-West structure still exists in Europe. This study examines the existence of such a structure from the novel perspective of psychic distance stimuli, showing no evidence of its persistence. Moreover, the results provide evidence on the fundamental role played by different dimensions of psychic distance, especially in levels of industrial development and language, as obstacles to foreign direct investments. On the contrary, distance in education is positively associated with investments, reflecting an efficiency-seeking MNE approach.

Suggested Citation

  • Palmero, Alfredo Jiménez & Herrera, Juan José Durán & Sabaté, Juan Manuel de la Fuente, 2013. "The role of psychic distance stimuli on the East-West FDI location structure in the EU. Evidence from Spanish MNEs," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 18(1), pages 36-65.
    • Handle: RePEc:nms:joeems:doi_10.1688/1862-0019_jeems_2013_01_palmero
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    Cited by:

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    2. Xinran Liu, 2019. "Effects of Multiple Dimensions of Intangible Distance on Agro-food Exports: Evidence from China," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(12), pages 1-75, December.
    3. Arturs Kalnins, 2022. "When does multicollinearity bias coefficients and cause type 1 errors? A reconciliation of Lindner, Puck, and Verbeke (2020) with Kalnins (2018)," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(7), pages 1536-1548, September.
    4. Krammer, Sorin M.S. & Jiménez, Alfredo, 2020. "Do political connections matter for firm innovation? Evidence from emerging markets in Central Asia and Eastern Europe," Technological Forecasting and Social Change, Elsevier, vol. 151(C).
    5. Bodlaj, Mateja & Vida, Irena, 2018. "Factors underlying cultural and psychic distance in cross-national activities of export managers: Qualitative insights from a CEE country," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 23(3), pages 351-376.

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    More about this item

    Keywords

    psychic distance; multinational enterprise; direct foreign investment; conditional logit model; Central and Eastern European Countries;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • P30 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - General

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