Title: The determinants of foreign investment size: the role of parent firm advantage and cross-national distance

Authors: Nan Zhou; Tianyou Hu; Andrew Delios

Addresses: School of Economics and Management, Advanced Institute of Business, Tongji University, Shanghai, China ' Department of Management and Marketing, KFUPM Business School, King Fahd University of Petroleum & Minerals, Az Zahran, Saudi Arabia ' Department of Strategy and Policy, NUS Business School, National University of Singapore, Singapore

Abstract: This study investigates the determinants of foreign investment size by considering the role of both parent firm advantage and cross-national distance. We first develop an economic model of foreign investment size. Building on this model and theories in international business, we derive hypotheses on the determinants of foreign investment size: it is positively related to parent firm-specific advantage, while it follows an inverted U-shape relationship with different dimensions of cross-national distances. Moreover, parent firm advantage and cross-national distance interact with each other to influence investment size. Our empirical analysis of Japanese firms' foreign direct investment (FDI) data from 1990 to 2009 supports our hypotheses. Our study contributes to the literature on FDI by examining an overlooked aspect of FDI: investment size. We also integrate economic model and international business theories to explain firm-level and country-level determinants of foreign investment size.

Keywords: FDI; investment size; parent firm advantage; cross-national distance.

DOI: 10.1504/EJIM.2023.128809

European Journal of International Management, 2023 Vol.19 No.3, pp.413 - 438

Received: 28 Mar 2018
Accepted: 05 Mar 2019
Published online: 07 Feb 2023 *

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