The determinants of new FDI capital flows into the EC : a statistical comparison of the USA and Japan

This article reviews the link between European integration and foreign direct investment (FDI) into the European Community (EC). A model is constructed using comparable US and Japanese data on new FDI flows for 1984-89. The data are clustered and pooled to enable intra-EC differences in the model to be investigated. It is found that new FDI has been linked to conventional host characteristics variables, whose effects vary considerably between groups of member countries. Differences between the equations for the USA and Japan are attributed to the contrasting degrees of establishment of US and Japanese affiliates. For Japanese firms, as comparative outsiders (compared with US firms), the impact of the announcement of the single market programme (SMP) has been marked. (Journal of Common Market Studies / FUB)