Does the Internet stimulate inward foreign direct investment?

This paper studies the effect of the Internet on the volume of inward foreign direct investment (FDI). The Internet is assumed to induce more FDI by improving productivity. Using bilateral FDI data from 14 source countries and 53 host countries, cross-country empirical regressions based on a gravity FDI equation are performed. We found by ordinary least-squares and weighted least-squares analysis that when the number of the Internet hosts or users in a host country increased by 10%, FDI inflows increased by more than 2%. (C) 2002 Society for Policy Modeling. Published by Elsevier Science Inc. All rights reserved.