Towards a better understanding of driving factors for FDI allocation. A country's goodwill: a new host country's FDI determinant?
This Thesis proposes a new approach to explaining the allocation of foreign direct investments (FDI), by applying the accounting framework for valuating a company’s intangible assets at a country level. This framework allows us to identify a valuable group of a country’s assets that previously had not been taken into account: a group of assets that forms a country’s Goodwill, or national Goodwill. National Goodwill includes all those unmeasurable, unquantifiable or not easily identifiable assets that add to (or subtract from) a country’s market value and that can, in turn, generate FDI inflows. The research shows how a simple accounting method identifying a company’s goodwill can be adapted into a formula that proxies a country’s Goodwill. By identifying and then quantifying a particular country’s Goodwill, for a large sample of countries, this Thesis postulates that it is possible to test the power of a country’s Goodwill to explain the cross-sectional and time-series variation in FDI flows for a broad set of countries. The ultimate aim of this research is, by placing the difficult to factor, yet extremely important -‘intangible assets’ of a country,- into a more quantifiable form, to provide a much needed specificity to our understanding of the factors that more accurately define a country’s value and attractiveness for FDI investments.
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