Country-of-origin determinants of foreign direct investment in an emerging market: The case of Mexico

Douglas E. Thomas, Robert Grosse

Research output: Contribution to journalArticle

45 Scopus citations

Abstract

Foreign direct investment (FDI) research has generally focused on inward FDI to large, developed nations. Very limited research has examined the country-of-origin factors that are related to FDI into the developing nations (emerging markets) that are becoming increasingly important in the global economy. In this paper, we provide the first empirical test of a multidimensional, country-of-origin model of factors related to FDI in an emerging market - Mexico. Economic, socio-political, and geographic factors are hypothesized to be important country-of-origin determinants of FDI into Mexico. The results indicate that some factors, such as the level of bilateral trade, home-country GDP, political risk, geographic distance, and exchange rates, are related to FDI into Mexico. At the same time, relationships between FDI and country-of-origin factors, such as market size (GDP) and cultural distance, that have previously held in research on FDI to large, developed nations do not hold in the same way in the emerging market context. Separate consideration of efficiency-seeking (maquila) FDI indicates that bilateral trade, wage rate, GDP, and the exchange rate contribute significantly to the explanation of inward FDI in Mexico.

Original languageEnglish (US)
Pages (from-to)59-79
Number of pages21
JournalJournal of International Management
Volume7
Issue number1
DOIs
StatePublished - Mar 1 2001
Externally publishedYes

Keywords

  • Emerging markets
  • Foreign direct investment
  • Mexico

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Strategy and Management

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