The determinants of the location of USA direct foreign investment

This article estimates a model of the location of USA direct foreign investment (DFI) in manufacturing that accounts for sociopolitical factors as well as host country demand and cost conditions. The results indicate that all three sets of factors play a significant role in shaping the geography of USA DFI. The results further indicate that the exclusion of sociopolitical factors from a model of DFI location not only limits the model's explanatory power, it leads to a misassessment of the influence of labour cost, tax rates, market size and other economic factors.