The Research Into The Psychic Distance’s Effect On The Distribution Of American OFDI

As the rapid development of world capital investment, especially for the outwardforeign direct investment (OFDI), it has brought about a lot of deeply effects oneconomy and society for both of the host countries and home countries. It is no doutedthat OFDI is a complex process. While we should take account of is the location firstly,but a series of complex domestic and foreign factors will affect the geographicaldistribution of OFDI.Currently, psychic distance has been used in many field about economy amongforeign papers, but there are rare papers on the influence of psychic distance on OFDI,and the literatures on systematic study of psychic distance indicators’ effect onOFDI’s distribution are fewer. Thus, this paper tries to analysize this topic. Besides,about the factors of psychic distance, different people have different opinion.On basisof the former studies, we choose cultural differences, language differences, differencesin education, political democracy difference, religious differences in resistance as wellas early colony as its factors, meanwhile, we refer to the type of the host countries.During this paper, we use46countries (or regions) as samples, and firstly weuse panel data from1995to2008to make the general regressions, then make twostage regressions, and draw the following important conclusionse: Firstly, Kogut,Singh (1988)[1]’s cultural distance is a part of the psychic distance,which refects onthe national cultural difference. Secondly, Kogut, Singh (1988)[1]’s formula on thecultural distance is not correct. Thirdly, the type of the host country (or region) affectsAmerican OFDI location significantly. The United States’ OFDI is more inclined todistribute in developed countries (or regions). Forthly, the constituent elements ofpsychic distance has a better effect on OFDI in1995-2001than in2002-2008. Fifthly,the location preference of multinational companies OFDI is objective, and usuallythey tend to invest a country (or region) which there is a small physic distance a largeeconomic size, and geographical proximity between the country (or region) with hostcountry. Finally, we make some relevant policy recommandations.