chapter  7
The link between cultural distance and foreign direct investment
Pages 34

As is noted in Chapter 5, while there is a considerable literature that seeks to identify the determinants of foreign direct investment, a clear theoretical foundation is lacking. Similarly, there is no consensus on what factors determine the levels of FDI flows and stocks. Several prior researchers have employed the gravity model when examining FDI flows; however, each of these works has its limitations and shortcomings. An alternative approach is followed by Blonigen (2005), Blonigen and Piger (2011), and Eicher et al. (2012), who seek to isolate the determinants of FDI flows and stocks by employing Bayesian Model Averaging (BMA). BMA is used to estimate the probability that each of a series of variables should be included among the set of explanatory variables.