FDI flows are generally believed to be influenced by economic indicators like market size, export intensity, institutions, etc, irrespective of the source and the destination countries. This paper looks at FDI inflows in an alternative approach based on the concepts of neighbourhood and extended neighbourhood. The study shows that the neighbourhood concepts are widely applicable in different contexts - particularly for China and India, and partly in the case of the Caribbean. There are significant common factors in explaining FDI inflows in select regions. While a substantial fraction of FDI inflows may be explained by select economic variables, country-specific factors and the idiosyncratic component account for more of the investment inflows in Europe, China and India.
