The Nexus between Foreign Aid and FDI:An Investigation on the Impact of Japan’s ODA on Japanese Firms’ Overseas Investments
Author: Yi-hung Chiou
Abstract / Chinese PDF Download
The goal of this article is to investigate the relationship between a state’s foreign aid and firms’ outward investments, as well as the firms’ political risk assessments regarding aid recipient states. Specifically, it examines whether Japan’s official development assistance (ODA) affects Japanese firms’ overseas investments. This paper argues that ODA, as an instrument of Japan’s foreign policy, reduces Japanese firms’ political risk concerns, while facilitating their investments in ODA recipient countries. Nevertheless, with changing ODA policies over time, whether the ODA-investment nexus remains valid is questionable. By illustrating the evolution of Japan’s ODA policy, this article adopts a quantitative approach to exploring whether Japan’s ODA affects Japanese firms’ political risk assessment, so as to enhance investments in the aid recipient countries.