Fung, K.C.Korhonen, IikkaLi, KeNg, Francis2012-05-312012-05-312008-08https://hdl.handle.net/10986/6809China has emerged as one of the top recipients of foreign direct investment in the world. Meanwhile, the successful transition experience of many Central and Eastern European countries has also allowed them to attract an increasing share of global foreign direct investment. In this paper, the authors use a panel data set to investigate whether foreign direct investment flows to these two regions are complements, substitutes, or independent of each other. Taking into account the role of host country characteristics - such as market size, degree of trade liberalization, and human capital - the authors find no evidence that foreign direct investment flows to one region are at the expense of those to the other. Instead, the results suggest that foreign direct investment flows are driven by distinct regional production networks (and thus are largely independent of each other) and the development of global supply chains (indicating that foreign direct investment flows are complementary).CC BY 3.0 IGOACCOUNTINGADVANCED COUNTRIESADVANCED ECONOMIESAFFILIATED ORGANIZATIONSARBITRATIONBALANCE OF PAYMENTSBANKING SYSTEMBENCHMARKBILATERAL TRADEBONDBUREAUCRATIC QUALITYBUSINESS ENVIRONMENTCAPITAL FLOWCAPITAL INVESTMENTCAPITAL MARKETCAPITAL MARKETSCENTRAL PLANNINGCHECKSCOMPARATIVE ADVANTAGECOMPARATIVE ADVANTAGESCOMPARATIVE ECONOMICSCORPORATE TAXCORPORATE TAX RATESCOUNTRY MARKETSCOUNTRY RISKCREDIBILITYDECISION MAKINGDEMOCRATIC ACCOUNTABILITYDEVELOPMENT BANKDEVELOPMENT ECONOMICSDIRECT INVESTMENT INFLOWSDOMESTIC FIRMSDOMESTIC MARKETDUMMY VARIABLEEAST EUROPEEAST EUROPEANECONOMETRIC ANALYSISECONOMETRICSECONOMIC COOPERATIONECONOMIC DEVELOPMENTECONOMIC EXPANSIONECONOMIC GEOGRAPHYECONOMIC GROWTHECONOMIC REFORMSEMERGING ECONOMIESEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKETSEXCHANGE RATESEXOGENOUS VARIABLESFDIFINANCIAL CRISESFINANCIAL CRISISFINANCIAL INSTABILITYFINANCIAL RISKSFINANCIAL STABILITYFINANCIAL SYSTEMFOREIGN CAPITALFOREIGN DIRECT INVESTMENTFOREIGN INVESTMENTFOREIGN INVESTORSFOREIGN TRADEFREE MARKET ECONOMYGDP PER CAPITAGLOBAL BANKINGGLOBAL ECONOMYGLOBAL PRODUCTION NETWORKGLOBALIZATIONGOVERNMENT FINANCEGROWTH RATEHORIZONTAL LINKAGEHOST COUNTRIESHOST COUNTRYHOST ECONOMYHOST-COUNTRYHUMAN CAPITALINCOMEINCOME TAXINCOME TAX RATEINCREASING RETURNSINSTITUTIONAL ENVIRONMENTINSTRUMENTINTERNATIONAL BANKINTERNATIONAL BUSINESSINTERNATIONAL ECONOMICSINTERNATIONAL INVESTMENTINTERNATIONAL INVESTORSINTERNATIONAL TRADEINVESTINGINVESTMENT ENVIRONMENTINVESTMENT FLOWINVESTMENT FLOWSINVESTMENT LOCATION DECISIONSINVESTMENT REGULATIONSLATIN AMERICANLAW ENFORCEMENTLOCAL CURRENCIESLOCAL CURRENCYLOCAL ECONOMYLOCAL MARKETLONG-TERM CAPITALLONG-TERM INVESTMENTMACROECONOMIC CONDITIONSMANUFACTURING SECTORMARKET SIZEMERGERSMNEMONETARY FUNDMULTINATIONAL CORPORATIONSMULTINATIONAL ENTERPRISEMULTINATIONAL ENTERPRISESMULTINATIONAL FIRMSNEWLY INDUSTRIALIZED COUNTRIESOPEN DOOR POLICYOUTSOURCINGPOLITICAL ECONOMYPOLITICAL RISKPOLITICAL STABILITYPOSITIVE COEFFICIENTPOSITIVE EFFECTSPOSITIVE EXTERNALITIESPOTENTIAL INVESTORSPRIVATIZATIONPRODUCTION COSTSPRODUCTIVITY GROWTHPROFIT MARGINPURCHASING POWERRAPID GROWTHREAL ESTATEREAL GDPREGIONAL INTEGRATIONREGULATORY RESTRICTIONSRETURNSSTRUCTURAL CHANGETAXTAX EXEMPTIONSTAX INCENTIVESTAX POLICIESTAX POLICYTAX RATETECHNOLOGY SPILLOVERSTELEPHONE LINESTOTAL REVENUETRADE BARRIERSTRADE LIBERALIZATIONTRANSITION ECONOMIESTURNOVERVERTICAL LINKAGESVERTICAL MULTINATIONALWAGE GROWTHWAGE RATESWAGESWORLD DEVELOPMENT INDICATORWORLD DEVELOPMENT INDICATORSWORLD ECONOMYWORLD INVESTMENT REPORTWORLD TRADEWORLD TRADE ORGANIZATIONWTOWorld Bank10.1596/1813-9450-4689