A Quantitative Analysis of Country Relations in Foreign Direct Investment

Abstract

According to Dunning’s eclectic theory, the location advantages play a key role in international investment mode choice, in which the country relations are important determinants. In some previous studies, the country relations and another bilateral factor, the country distance, are often confused, which can result in the inconsistency of conclusions. And excepting political factors, the economic dependence and other relations are insufficiently considered in the literature. This article makes a distinction between relation and distance, and puts forward a simplified analytical framework, the indicator system, and some quantitative methods for country relations. The indicators, including political, economic, and social factors, can better satisfy the horizontal analysis of the outbound investment. The economic and social indicators are determined by the magnitude of interaction as well as the share in the home country, and hence, the evaluation results can reflect the differences between the two countries. Finally, by evaluating the relations of other BRICS countries with China, the rationality is illustrated.