When Near is Far and Far is Near:FDI, Geographic Location and Connectivity

Abstract

Building on sociology theories that separate physical geography from its metaphorical connotations, we offer reconciliation for the theoretical ambiguity and conflicting empirical findings regarding the impact of countries’ geographic location on their performance as hosts for FDI. Quantile regression of FDI flows and stocks to 159 countries observed during 1980-2011 shows that the impact is contingent upon country unilateral characteristics and their connectivity to other countries, and that the relationships vary across different segments of the FDI distribution. These findings suggest that whereas geography is a fixed country attribute, its consequences are intertwined with the characteristics of countries and are constructed by their actions. We outline the ways by which the perceptions of remoteness and proximity that we advance in this paper should be incorporated in MNE strategies and modify their location choices and strategic responses to geographic location.