Uncertainty and mimetic entry: an empirical location choice study on greenfield FDI in Brazil from an institutional perspective

Abstract

Greenfield Foreign Direct Investment (GFDI), meaning new investments from the ground-up (e.g., new industrial plants), may benefit the host. Hence, emerging economies' policymakers are interested in understanding the location choice of GFDI. The recent discussion on institutions argues that foreign investors are influenced by their home country environment and peers, particularly when dealing with uncertainty. As emerging regions present broad political and market uncertainties, along with great regional disparities, there is an isomorphic pressure influencing investors to imitate their peers and tackle uncertainty abroad. With this, the literature points to the 'follow-the-leader' effect where Multinational Companies (MNCs) present similar location choices. Yet, this mimetic entry phenomenon is poorly explored, and this project argues that heterogeneity matters. For example, imitation may be particularly important for MNCs from institutionally weak countries. To advance this debate and to fill a gap in the literature, this project aims to investigate the location choice of greenfield FDI in Brazil considering the heterogeneous characteristics of the home country and host region conjointly. Brazil is a territory with well-documented disparities, and mimicry may be more frequent in poorly-developed areas (e.g., outside São Paulo State). As such, Brazil presents an appropriate context to investigate the location choice of new investors. This project will be the first to investigate the location choice of greenfield FDI in Brazil considering the heterogeneity from the home country, the firm, and the host region. Thus, this project will employ databases usually unavailable to Brazilian scholars, while expanding the discussion initiated by the Doctorate FAPESP Project #2020/06473-1 and the regular FAPESP Project #2019/19905-0. (AU)