Determinants of Swedish Foreign Direct Investments (FDI): How Important is Profitability?
2016 (English)In: Economics and Finance Review, ISSN 2047-0401, E-ISSN 2047-0401, Vol. 4, no 10, 1-19 p.Article in journal (Refereed) Published
Numerous studies have been undertaken regarding FDI, its determinants and impact on beneficiary countries, but very few papers directly examined profitability and its importance for the FDI. The study addresses this gap by including return on capital into determinants of Swedish FDI alongside the variables that are traditionally assumed to have an impact on FDI. Regression analysis suggests that the predictive role of profitability is significantly superior to that of other variables, explaining 85% of the variation of FDI stock. Market size, geographical location and economic freedom in the beneficiary country are other variables that have statistical support for their roles. Conversely, the study refutes the significance of several variables which are commonly believed to be important determinants of FDI. The findings of the article will have certain implications for company managers, policy-makers and academicians. The study also indicates that the reforms aimed at improving investment climate in beneficiary countries may not be efficient if we fail to understand the connection between the business environment and the profitability of a particular project.
Place, publisher, year, edition, pages
2016. Vol. 4, no 10, 1-19 p.
Foreign Direct Investments (FDI), determinants of FDI, return on capital, multiple regression analysis, Sweden
Economics and Business
Research subject Politics, Economy and the Organization of Society
IdentifiersURN: urn:nbn:se:sh:diva-30672OAI: oai:DiVA.org:sh-30672DiVA: diva2:950077