The Impact of Distance, National Transportation Systems and Logistics Performance on FDI and International Trade Patterns: Results from Asian Global Value Chains

Tilo F. Halaszovich, Aseem Kinra*

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

With almost 30 per cent of the global foreign direct investment (FDI) inflows channeled to Asia the region is world leading in attracting FDI. Yet, on a sub-regional level South Asia is the weakest region among all Asian sub-regions. This gives raise to the question what separates South Asian countries from their more successful East and South East neighbouring countries.

The general question why certain countries manage to attract FDI while others fail has been frequently addressed in literature. Moreover, research in logistics and transportation claims on a host of determinants that explains the location considerations of MNEs based on host country logistic performance. By implementing these determinants into more traditional FDI and trade models our objective is to shed more light on the importance of the individual aspects of national transportation systems on the FDI and trade patterns in the Asian region. Moreover, we provide theoretical arguments and empirical evidence that national transportation systems moderate the effects of the different dimensions of (between-) country distance on international trade and FDI performance.

Our findings show that the elements of national transportation systems positively influence both trade and FDI. Additionally, more developed national transportation systems are able to overcome the costs of distance to some degree. We also find support for the notion that the nature of the costs of geographic distance (e.g. transportation costs) differ between trade and FDI. While the former is related to international transportation and port infrastructure, the latter is based on within-country transportation and is moderated by land-based transportation infrastructure.
Original languageEnglish
JournalTransport Policy
Number of pages13
ISSN0967-070X
DOIs
Publication statusPublished - 4 Sep 2018

Bibliographical note

Epub ahead of print. Published online: 4 September 2018

Keywords

  • Transportation systems
  • Logistics performance
  • Global value chains
  • FDI
  • International trade
  • Costs of distance
  • Gravity model

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