A study of language effects on inward FDI flows in Southeast Asia

Abstract

This master thesis explores how language might affectthe yearly flow of foreign direct investment (FDI) towards five Southeast Asian countries: Indonesia, Malaysia, Philippines, Singapore and Thailand. This is aresearch area that has been quite unexplored, and we find it interesting to put forward some hypotheses to observe if there exist such effects or not. By using multiple regression analysison a relevant dataset, three main hypothesesare tested:•Countries in which a global language holds an official status will contribute more FDI than other countries.•Countries that share a global language with a FDI recipient country will contribute moreFDI that other countries.•Countries that are at a greater linguistic distance from the FDI recipient countries will contribute less FDI than other countries with a smaller linguistic distance.In general,our analysis doesnot support any of the hypothesis. One exception is that linguistic distance from the recipient’s major language to English influences the yearly FDI flow. Other determinants like GDP and colonial ties are on the other hand more significant to explain FDI. Keywords: Foreign Direct Investment, Language, Southeast Asia.