Impact of historical conflict on FDI location and performance: Japanese investment in China

Gerald Yong Gao, Danny T WANG, Yi Che*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

26 Citations (Scopus)
2 Downloads (Pure)

Abstract

Historical relations between countries bring important explanatory power for foreign direct investment (FDI) decisions, yet little is known on whether a home–host country relation exhibits heterogeneous effects on FDI across the country’s subnational regions. In this study, we examine the long-term impact of historical conflict on FDI location choices and performance. Using a sample of 8,646 Japanese FDI in China, we show that civilian casualties in different provinces of China during the Second Sino–Japanese War exert deterring effects on Japanese FDI location choices. Furthermore, we demonstrate that civilian casualties negatively affect Japanese FDI performance and political capital accumulation strategies, in the forms of excessive tax payment and local employment, can reduce this negative effect. This study contributes to the discussion on how within-country differences of historical factors affect FDI location decisions and performance. The findings on firms’ political capital accumulation strategies also provide important implications for FDI operation in an environment characterized by historical animosity.

Original languageEnglish
Pages (from-to)1060-1080
Number of pages21
JournalJournal of International Business Studies
Volume49
Issue number8
DOIs
Publication statusPublished - 1 Oct 2018

Scopus Subject Areas

  • Business and International Management
  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Strategy and Management
  • Management of Technology and Innovation

User-Defined Keywords

  • China
  • FDI
  • historical conflict
  • Japanese firms
  • location
  • performance
  • political capital

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