Location-specific determinants of Japanese foreign direct investment in selected Asian countries

Abstract

This thesis contributes to examine the location-specific determinants influencing on Japanese foreign direct investment. This research uses fixed effect method and panel data of ten selected Asian countries in the period from 1995 to 2012. The determinants are classified into three groups: policy factor, business facilitation and economic factor. In this study, except for the variables which belong to policy factor and business facilitation, the others of economic factor are categorized in accordance with three main motives for Japanese enterprises investing abroad. Those motives are market-seeking, resource-seeking and efficiency-seeking. The study finds that market size, natural resource, inflation rate, exchange rate volatility, political risk and infrastructure development are the significant factors. Moreover, among ten selected Asian countries, there are the differences between intercept coefficients of Vietnam and other countries who are Thailand, Indonesia, Vietnam– Philippines and China. In other words, except for the determinants in the regression model, there would be other factors making those countries to be more dominant than Vietnam. Finally, recognizing the need of Japanese foreign direct investment, the policy makers in host countries should apply the relevant policies to improve the business environment for becoming promising destinations and attract more Japanese foreign direct investment.