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Do international flights promote FDI? : the role of face-to-face communication

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  • Tanaka, Kiyoyasu

Abstract

Air transportation facilitates face-to-face interactions across borders for the spatial expansion of manufacturing production. I investigate the impact of international flights on FDI entry by Japanese firms. I find that FDI entry significantly increases with the weekly frequency of flights from Japan, and the positive impact increases with a proxy for an intensity of face-to-face communication between the parent firm and foreign affiliate. The results are robust to estimation methods, additional control variables, and definitions of face-to-face communication. Thus, the results suggest that flights encourage FDI entry through a reduction in face-to-face communication costs.

Suggested Citation

  • Tanaka, Kiyoyasu, 2016. "Do international flights promote FDI? : the role of face-to-face communication," IDE Discussion Papers 554, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper554
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    2. Sun, Xinyu & Yan, Sen & Liu, Tao & Wang, Jiayin, 2023. "The impact of high-speed rail on urban economy: Synergy with urban agglomeration policy," Transport Policy, Elsevier, vol. 130(C), pages 141-154.
    3. Tanaka, Kiyoyasu, 2023. "What hinders digital communication? Evidence from foreign firms in Japan," Japan and the World Economy, Elsevier, vol. 66(C).
    4. Banri Ito & Katsunori Shirai, 2024. "City-specific determinants of cross-border M&As: an inter-urban gravity approach," International Economics and Economic Policy, Springer, vol. 21(1), pages 65-88, February.
    5. Oum, Tae Hoon & Wu, Xiangru & Wang, Kun, 2024. "Impact of air connectivity on bilateral service export and import trade: The case of China," Transport Policy, Elsevier, vol. 148(C), pages 219-233.
    6. Oum, Tae Hoon & Wang, Kun & Yan, Jia, 2019. "Measuring the effects of open skies agreements on bilateral passenger flow and service export and import trades," Transport Policy, Elsevier, vol. 74(C), pages 1-14.
    7. Xue BAI & MA Hong & MAKIOKA Ryo, 2022. "The Values of Export Promotion: The case of the canton fair during the SARS epidemic," Discussion papers 22078, Research Institute of Economy, Trade and Industry (RIETI).
    8. Zhu, Zhenran & Zhang, Anming & Zhang, Yahua, 2018. "Connectivity of intercity passenger transportation in China: A multi-modal and network approach," Journal of Transport Geography, Elsevier, vol. 71(C), pages 263-276.
    9. Lisha He & Mia M Bennett & Ronghao Jiang, 2022. "The uneven geography of real estate investment by Mainland Chinese state-owned and private enterprises in the U.S.: Local market conditions, migration, and ethnic networks," Environment and Planning A, , vol. 54(4), pages 653-675, June.

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    More about this item

    Keywords

    Japan; Air transport; Foreign investments; Direct Flight; FDI; Face-to-Face Contact;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

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