Economic Distance and The Survival of Foreign Direct Investments

Abstract

Taking a theoretical perspective contrasting resource exploitation with resource exploration, we argue that foreign direct investments' (FDIs') hazard rates are lower in countries that are either more or less developed than a home country than are FDIs' hazard rates in countries of similar economic development. We obtained strong supporting evidence in a sample of FDIs made by Singapore firms. Further, using the reasoning of strategic coalignment, we argue that acquisitions have lower hazard rates than greenfield investments in more developed countries and vice versa in less developed countries. We found supporting evidence for the former argument but not for the latter.