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Behavioural influences in Portuguese foreign direct investment

By Ricardo Pinheiro-Alves

Abstract

The paper presents a behavioural economics approach to FDI. It relies on questionnaires and interviews with Portuguese managers to present evidence of the role played by herding, anchoring, mental accounting and other behavioural rules in FDI location decisions. It originates a set of heuristics influencing the direction of FDI flows and it confirms the prediction of the (Heiner, 1983) and (Heiner, 1989) that the higher the uncertainty faced by decision makers the more frequent will be the use of behavioural rules. The results go beyond neoclassical theory by helping to explain non-maximizing decision-making by managers.Behavioural economics Uncertainty FDI determinants Decision making

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