This study aims to examine the impacts of country risks on outward foreign direct investment (OFDI) of emerging source countries (ESCs). This study disaggregates destinations as developed countries (DCs), emerging countries (ECs) and other developing countries (ODCs). Additionally, country risks are categorized as economic, political and natural risks. Hardly do there exist any earlier studies that have examined the source country’s perspective and segregated destinations as per their level of development. This study uses a gravity model approach for a total of 166 countries and employs the Poisson Pseudo Maximum Likelihood (PPML) method, which is effective for estimating the FDI gravity model. The findings of this study show that the three risk factors are not responding in a similar manner to the FDI of both source and host countries. It is the nature of country risks of home countries that motivates outward FDI from emerging sources to select their destinations as DCs, ECs or ODCs. The results for bilateral export of ECs show that it is a potential complementary instrument that can be used as a learning mechanism to obtain foreign market-specific knowledge in the presence of country risks.
Behera et al. (Wed,) studied this question.