The relationship between the diplomatic network and the outward foreign direct investments

This paper examines the relationship between the diplomatic network, measured as the number of embassies, consulates, investment promotion agencies and state visits, and the outward foreign direct investment flows applied to the Netherlands. The results indicate that there is indeed a positive relationship between the number of embassies/consulates and the Dutch outward foreign direct investments flows, after controlling for other investment determinants and after taking the endogeneity problem into account. The opening of an embassy or consulate increases the outward investments with approximately twenty-five percent. Regarding to the investment promotion agencies and the state visits, no conclusions can be made with this analysis.