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Familiarity Breeds Investment: Diaspora Networks and International Investment

Published online by Cambridge University Press:  05 August 2010

DAVID LEBLANG
DAVID LEBLANG*
Affiliation:
University of Virginia
*
David Leblang is J. Wilson Newman Professor of Governance, Department of Politics, University of Virginia, P.O. Box 400787, Charlottesville, VA 22904 ([email protected]).
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Abstract

What explains cross-national patterns of international portfolio and foreign direct investment (FDI)? While existing explanations focus on the credibility of a policy maker's commitment, we emphasize the role of diaspora networks. We hypothesize that diaspora networks—connections between migrants residing in investing countries and their home country—influence global investment by reducing transaction and information costs. This hypothesis is tested using dyadic cross-sectional data for both portfolio and FDI. The findings indicate that even after controlling for a multitude of factors, disapora networks have both a substantively significant effect and a statistically significant effect on cross-border investment.

Type
Research Article
Information
American Political Science Review , Volume 104 , Issue 3 , August 2010 , pp. 584 - 600
Copyright
Copyright © American Political Science Association 2010

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