The distribution patterns of United States foreign direct investment: Sensitivity of locational and policy variables by dynamic features of international investments

The aims of this research are to examine the effects of dynamic features on the flows of international investments and to test hypotheses related to the dynamic effects--interaction and time effects. The interaction effects suggest that the determinants of FDI are not independently exerting influence on but jointly affecting the flows of FDI. The test results show some interaction effects depending on the type of country, industry, and investment. The test results provide policy implications that policymakers have to take into account the interrelationship between the policies which they are willing to adopt and the other determinants, and also consider the varying-interrelationship according to the characteristics of host countries, industries, and investments before establishing policies on FDI.;The second dynamic feature introduced in this paper is time effects. Time effects posit that the probability of an investment in a certain location has a functional relationship with previous cumulative investments in that location. In this paper, this relationship is examined with diffusion models developed in marketing science. The test results indicate that distribution patterns of U.S. FDI are well explained by diffusion models, implying time effects are significant for the flows of FDI. This paper also investigates the relationship between the characteristics of host countries and time effects from a strategic point of view. The empirical tests demonstrate the possibility of changing the time effects on FDI through government policies.