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How Far Away is an Intangible? Services FDI and Distance


  • This paper is produced as part of the project ‘Globalization, Investment and Services Trade (GIST) Marie Curie Initial Training Network (ITN)’ funded by the European Commission under its Seventh Framework Programme – Contract No. FP7-PEOPLE-ITN-2008-211429. We thank seminar participants at the Laboratoire d’Economie d’Orléans, 2011 European Trade Study Group Meeting, the 2011 European Economics Association, the 2011 Globalisation and Economic Policy Annual Postgraduate Conference and the 2011 Irish Society for New Economists Conference. All remaining errors are our own.


Foreign direct investment (FDI) in services has grown significantly in recent years. Evidence of spatial relationships in FDI decisions have been provided for goods manufacturing by utilising physical distance-based measures of trade costs. This paper investigates spatial interactions for services FDI using several distance measures, including physical distance, genetic distance and transport time. Across different measures of distance, the traditional determinants of outbound FDI activity remain valid for services. We also find spatial interdependence for services FDI that is generally supportive of export-platform FDI.