Ethical issues in Japanese foreign direct investment in developed versus developing countries

Paul W. Beamish, George Z. Peng, Jean Marie Nkongolo-Bakenda

Research output: Chapter in Book/Report/Conference proceedingChapterResearchpeer-review


We examine the relationships between national ethical environment (NEE) and foreign direct investment (FDI) in developing and developed countries from an institutional theory perspective. Based on a NEE measure developed by Franke and Nadler (2008) and FDI data from the Ministry of Finance of Japan, we find that the relationship between the level of NEE and Japanese FDI inflow is positive for developing countries, but negative for developed countries. Our findings highlight the need to consider both transaction cost and conformity cost when studying FDI behavior, and to distinguish between developing and developed countries due to the fundamental differences in sensitivity of each cost to institutions in these two settings. We call for a refocus on institutional theory’s core purpose of understanding how organizations acquire institutional conformity without sacrificing their internal efficiency. This study also sheds indirect light on how FDI behaves with regard to “socially responsible international business.”

Original languageEnglish
Title of host publicationSocially Responsible International Business: Critical Issues and the Way Forward
EditorsLeonidas C Leonidou, Constantine S. Katsikeas, Saeed Samiee, Constantinos N. Leonidou
PublisherEdward Elgar Publishing
Number of pages29
ISBN (Electronic)9781788114127
ISBN (Print)9781788114110
Publication statusPublished - 29 Nov 2019
Externally publishedYes


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