Judging Japan's FDI: The verdict from a dartboard model

Abstract

We evaluate Japan's inward and outward FDI performance using theoretical benchmarks based on the premise that management teams headquartered around the world bid for the production facilities located in each country. Our model incorporates the assumption that bids are inversely proportionate to distance. It accurately predicts the multilateral shares of FDI stocks for most important countries. The theory predicts lower shares of FDI for Japan than its share of the world economy. Japan's actual share of outward FDI exceeds its inward share—as the model predicts—but both currently lie below the benchmark predictions. J. Japanese Int. Economies 19 (2) (2005) 215–232.