Geographic Determinants of Australian Foreign Direct Investment
Kishor Sharma and Yapa Bandara
Working Paper No. 05/07
June 2007
About the Authors
- Kishor Sharma
School of Commerce
Charles Sturt University
Wagga Wagga, NSW 2678
Australia - Phone No. (+612) 6933 2752
- Yapa Bandara
School of Commerce
Charles Sturt University
Wagga Wagga, NSW 2678
Australia - Phone No. (+612) 6933 2960
Charles Sturt University – Faculty of Business Working Paper Series
Managing Editor: Associate Professor Jayne Bisman, School of Accounting, Bathurst
Editors: Dr P. Mathews, School of Commerce, Wagga Wagga
Associate Professor M. O'Mullane, School of Business, Albury
Dr R. Tierney, School of Marketing and Management, Bathurst
Dr D Ardagh, School of Commerce, Wagga Wagga
Ms K Mather, School of Computing and Mathematics, Wagga Wagga
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Table of Contents
- Abstract
- Introduction
- Trends and Patterns of Australian outward FDI
- Analytical Context and the Model Formulation
- Model Estimation
- Conclusion
- References
Abstract
The volume of investment that has flowed from Australia into the outside world, and its implications for economic policy, has attracted substantial policy debate among Australian policy makers, particularly in the context of regionalisation of the world economy. Using hypotheses from investment demand model and new trade theory we investigate if market size, its growth rate, openness, regional economic integration, cultural similarity and the availability of knowledge capital have any impact in attracting Australian investments offshore. Our results suggest that countries which are open, have a large domestic market and stable macro-economic environment tend to attract most Australian FDI. Regional integration, and the similarity in langauge and culture do not have any effect in attracting FDI from Australia. This result has a significant policy implications not only for Australia, but also for other countries who are increasingly engaged in forming trading blocs like Australia-US free trade agreements (AUSFTA).