| Using a cross-national research design, this study identifies and empirically tests a model of host country locational determinants of inflows of foreign direct investment. Data were obtained for a total of 282 new, export-earning investments made by U.S. firms in 20 Caribbean and Central American countries between 1984 and 1987. The investments were classified into six general categories: miscellaneous manufacturing, apparel assembly, agriculture, data services, hotels and leather goods production. Locational factors were classified into four categories: labor, infrastructure, macroeconomic factors and business policies.;Results of the statistical analysis, using ordinary least squares regression procedures, suggest that locational determinants vary with the type of investment. Variables measuring quality of labor were found to be positively related to all types of investment inflows. However, variables measuring the cost of labor were found to be significant for only three types of investment: miscellaneous manufacturing, apparel and hotels. These findings support the contention that one element in comparative advantage for the countries of the region is relatively low cost, relatively highly skilled labor.;Only a few infrastructure variables were found to be statistically significant. Moreover, in many cases, the statistical relationships between variables measuring quality and availability of infrastructure and investment inflows were negative. It was concluded that these statistical relationships were confounded with level of economic development.;The negative relationship of GDP to investment inflows runs counter to findings of previous studies. However, it supports the hypothesis that locational determinants of export-seeking investments are different from determinants of market-seeking investments.;Finally, host country policies also were found to vary with type of investment. Tax incentives were found to be statistically significant and positively related to inflows of general manufacturing, leather goods, and apparel assembly investments. In addition, internal or transborder warfare and revolution and policies requiring the surrender of foreign exchange earnings to a central government authority were found to be significant for some investment types. |
