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Finance-specific Factors as Drivers of Cross-border Investment – An Empirical Investigation

Reprint No. 2008:35

Author(s): Jens Forssbæck and Lars OxelheimYear: 2008 Title: International Business Review Volume (No.): 17 (6) Pages: 630–641


In this paper we empirically test the role of firm-specific financial characteristics as drivers of international investment and production. We hypothesize that financial strength generates advantages that can be exploited through cross-border investment activity. The hypothesis is tested in a series of binary-response models, using a sample of 1379 European non-financial firms’ international acquisitions. Controlling for traditional firm- and target-country-specific foreign direct investment (FDI) determinants, we find strong evidence that financial factors play a significant role in explaining cross-border investment. We conclude that without explicit consideration of the financial dimension, firms’ FDI decisions cannot be properly understood.


Reference:
Forssbæck, Jens and Lars Oxelheim (2008), "Finance-specific Factors as Drivers of Cross-border Investment – An Empirical Investigation". International Business Review 17(6), 630–641.

Lars Oxelheim

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lars.oxelheim@ifn.se

An Agenda for Europe

Institutional Reform for Innovation and Entrepreneurship

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The authors of this book, Niklas Elert, Magnus Henrekson and Mikael Stenkula, advise the economies of the European Union to become more entrepreneurial in promoting innovation and economic growth. The authors propose a reform strategy with respect to several aspects to achieve this goal.

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