Host Country Marketing Culture and Foreign Direct Investment

This paper attempts to analyze the impact of host country competitive environment on the level of FDI that the host country receives. Specifically, we consider two features of the competitive environment: buyers’ sophistication and firms’ degree of customer orientation. Using a large set of panel data and controlling for economic causes along with sources of risk, we find that FDI stocks in a country decreases with the degree of buyer sophistication and increases with the degree of customer orientation of firms. These results suggest that target country competitive environment is an important factor that determines where FDI goes.