The impact of affinity on world economic integration: The case of Japanese foreign direct investment

This paper finds that a country's affinity with a foreign country has a positive effect on foreign direct investment flows from it to that country. by analyzing Japanese foreign direct investment outflows during the period of 1995-2009. A rise in a country's affinity with a foreign country is thought to enhance its trust in that country and as a result lower the transaction costs of its economic activities with it, thereby helping to promote its foreign direct investment flows to the country. These findings imply that a rise in affinity among countries is likely to facilitate international economic integration. (C) 2012 Elsevier B.V. All rights reserved.