Bilateral foreign direct investment and European colonialism

Chrobok, Florian (2024) Bilateral foreign direct investment and European colonialism. MPhil(R) thesis, University of Glasgow.

Abstract

In the quest to identify key influences on foreign direct investment (FDI) flows, previous studies have often ignored the effects of relational factors that have historically been formed between countries. Hence, this thesis aims to reintegrate history into international business by posing the question: How do the historical colonial ties between European colonisers and their former colonies affect inward foreign direct investment flows from source to destination countries? From both a theoretical and practical standpoint, this question holds significance. The empirical analysis in this study employs a panel dataset on bilateral inward FDI stocks from 191 source countries to 201 host countries, which comprise advanced, emerging, and developing economies. The data cover the period from 2001 to 2012 and were selected solely based on availability. Controlling for standard gravity variables and other determinants of interest, this study finds statistically significant results concerning the effects of historical colonial relationships on inward foreign direct investment. The results show that historical colonial ties and common colonial experiences between source and host countries lead to more aggregate inward FDI and increase the probability that two countries engage in foreign direct investment in the first place. The empirical findings also indicate that a larger share of European settlers during colonial times, historical colonial relationships established by concessionary companies and Christian missionaries from the source country, and a longer period of colonial rule lead to more aggregate inward FDI in the host country. Ordinary least squares (OLS), Tobit, and Heckman sample-selection estimates confirm these findings, while the Poisson pseudomaximum likelihood (PPML) estimator either fails to produce statistically significant estimates or comes to contradictory conclusions for the influence of common colonial experiences and the period of colonial rule. Despite these minor ambiguities, it is recommended for multinational enterprises (MNEs) to invest in countries that were colonised by their respective home countries, whereas colonised host countries should direct their promotional efforts towards direct investors that are based in former coloniser states.

• Item Type: Thesis (MPhil(R))
• Qualification Level: Masters
• Subjects: H Social Sciences > HB Economic Theory; H Social Sciences > HC Economic History and Conditions
• Colleges/Schools: College of Social Sciences > Adam Smith Business School
• Supervisor's Name: MacDonald, Professor Ronald
• Date of Award: 2024
• Depositing User: Theses Team
• Unique ID: glathesis:2024-84812
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 16 Jan 2025 10:06
• Last Modified: 16 Jan 2025 10:06
• Thesis DOI: 10.5525/gla.thesis.84812
• URI: https://theses.gla.ac.uk/id/eprint/84812