Foreign direct investment,labour relations and sector effects: US investment outflows to Europe

This paper analyses the impact of national labour relations on foreign direct investment (FDI), with emphasis on macro-markets and sector properties. Since there are sector-specific differences between industries in transferability, labour-relations effects on FDI probably vary across sectors. The paper finds that labour costs dampen FDI, while the impact of national market potential remains inconclusive. Collective labour institutions have a significantly adverse impact on FDI in manufacturing, and a relatively beneficial one on FDI in services. While investment in manufacturing seeks to minimize labour costs at given skill levels, investment in services maximizes skills at given levels of cost.     

Foreign direct investment: A genetic algorithm approach

This paper proposes a genetic algorithm (GA) approach as an analytical tool with a carefully defined fitness function for variable selection. Discriminant analysis will be used as a parameter evaluation method for the analysis of inward foreign direct investment (FDI) in China. Results indicate that the proposed GA method is more efficient in classifying “successful or unsuccessful” inward FDI by providing higher accuracy rates while using fewer variables than previous efforts. An implication of this result is that, given a scarcity of resources and the need to promote FDI, the proposed GA may provide a more efficient way to concentrate on those fewer variables found to be important determinants of “successful” FDI inflow.     

Foreign direct investment and industrial agglomeration: Evidence from India

This study analyses the spatial and sectoral distribution of Greenfield Foreign Direct Investment (GFDI) and its impact on industrial agglomeration in India for the time period 2006–2015. We employ a unique dataset obtained by merging GFDI data from FDI Markets and plant level data from Annual Survey of Industries (ASI). We find that the Indian manufacturing sector shows signs of industrial dispersion rather than agglomeration throughout the sample period. Likewise, the spatial distribution pattern of GFDI also shows a decline in regional concentration and, interestingly, GFDI also seems to target new destinations. We also find that the increased spatial spread of GFDI leads to an industrial dispersion in Indian manufacturing industries.     

发展中国家对外直接投资的新趋势

文章在系统总结发展中国家对外直接投资历程的基础上,结合发展中国家FDI出现的新特点,认为发展中国家的对外直接投资除已出现学习型FDI、竞争策略型FDI以外,极少数发展中国家的跨国公司已开始进入更为高级的市场势力型FDI阶段。     

Foreign direct investment and its determinants: A regional panel causality analysis

Moving beyond traditional one- or possibly two-way causality involving foreign direct investment (FDI), a systematic approach is implemented for delineating both short- and long-run flows of causality involving FDI and a comprehensive set of FDI's possible determinants. Granger causality procedures incorporating error correction terms are implemented, using provincial panel data from China. In both the short and long run, growth in GDP directly influences FDI, while growth in local infrastructure and local investment provide indirect but not direct influence.     

Foreign direct investment and economic growth in Sub-Saharan Africa: A nonlinear analysis

Using the threshold regression model, we examine the effects of Foreign Direct Investment (FDI), and the mediating role of FDI absorptive capacity, on economic growth in Sub-Saharan Africa. We find that the threshold level of FDI inflows per person is approximately US$ 44.67 per annum. For FDI to have an appreciable impact on economic growth, countries must have minimum capacity to absorb the growth-enhancing benefits of FDI. For instance, the technology gap between the hosted foreign enterprises and domestic enterprises should be no less than 0.6904. Thus, achieving the FDI threshold level is a necessary, but not sufficient, condition for economic growth. Some countries use tax incentives to improve FDI inflows. We argue that such incentives may be counterproductive at low levels of FDI inflows: FDI coefficient estimates below the lowest threshold level are negative, implying that the higher costs of such incentives exceed the potential benefits availed by FDI’s direct contribution to economic output and spillovers.     

Foreign direct investment and financial markets influences: Results from the United States

This paper investigates the linkages among Foreign Direct Investment (FDI-greenfield and mergers and acquisitions (M&A)) decisions and equity market returns and volatilities. The central premise is that FDI decisions by Multinational Enterprises (MNE) are influenced, among other factors, by risk and uncertainty indicated by equity market returns and volatilities in the destination (host) countries. This is because of the events on the stock markets in general, and their volatilities, in particular, signal the vitality of the investment climate of the target country. Including capital market variables among the determinants of FDI is important for assessing the cost of capital and for evaluating direct investment and asset allocation decisions.Secondary time-series data (quarterly) were used on incoming US FDI from 1994 to 2018 along with data on independent variables such as exchange rates, inflation, market size, equity market returns, and equity market volatilities. Thus, the paper endeavors to contribute to the International Business literature by highlighting the role played of equity returns and volatilities in FDI decisions and therewith attempts to integrate finance (capital markets) with International Business/Strategic Decision making. Several different regression specifications (OLS, Fixed, and random-effects and VAR) were utilized to analyze the data, and capital market variables (stock returns and volatilities) were found to influence the location of production facilities by a multinational enterprise (MNE). In other words, the share of production capacity optimally located abroad, as well as M&A decisions, are influenced by capital market returns and volatilities.     

Foreign direct investment and productivity spillovers in the Chinese manufacturing sector

In this paper a simple simultaneous model is constructed to examine whether there are productivity spillovers from both the presence of foreign direct investment (FDI) and competition between local and foreign firms. The model is tested on the data from China’s latest industrial census in 1995. The results indicate that the extent to which spillovers occur varies with different types of ownership of local firms and of FDI. While collective- and private-owned enterprises benefit from demonstration and contagion effects from foreign presence, productivity gains of state-owned enterprises largely come from competition with foreign firms. Productivities of local and foreign firms are jointly determined. Evidence also suggests that market-oriented FDI tends to generate spillovers mainly via competition with local firms.     

Foreign direct investment and small firm employment in northern Mexico: 1987-1996

This study analyses the impact of foreign direct investment on small business employment along the border in Mexico between 1987 and 1996. During this period, unprecedented levels of foreign direct investment flowed to Mexico, most notably to the northern border region. At the same time, it appears that internal migration of workers from the interior to the border occurred in response to employment generated by this investment. Utilizing 1987 and 1996 data from the Encuesta Nacional de Empleo Urbano, bivariate probit models of employment and small/ large firm employment for the border and interior regions are estimated. The results suggest that the increased employment share captured by large firms in the border may have hindered growth in the small business sector. A better understanding of the impact of FDI flows on small businesses may help policymakers in developing countries as they strive to create broad-based economic growth.     

Foreign direct investment and global sourcing choices of firms in the US

This paper investigates factors affecting the global sourcing choices of firms in the US: (1) US investment abroad; (2) foreign direct investment in the US; (3) wage–productivity ratio; and (4) transaction cost. I found that there is a statistically significant association between the country of sourcing choices and foreign direct investment. Both the wage–productivity ratios and transaction costs are not statistically significant at the conventional significance level, but their regression coefficients show proper signs. The paper also examines the patterns of foreign direct investment among countries and compares transaction costs by income group. Copyright © 2000 John Wiley & Sons, Ltd.     

Foreign direct investment, trade openness and economic growth in pakistan and turkey: an investigation using bounds test

In the literature empirical evidences regarding export-led growth (ELG), FDI-led exports, and growth-driven exports (GDE) hypotheses have been mixed and inconclusive. This paper uses the autoregressive distributed lags (ARDL) model (Pesaran and Shin, Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, 1990) and tests the existence of long run equilibrium relationship between the determinants of growth during the period 1975?C2004 for Pakistan and Turkey. The results indicate that in the short run there is bi-directional causal relationship between trade openness and exports for Pakistan and FDI and exports relationship for Turkey. The long run relationship results support the growth-driven exports hypothesis for Turkey and openness-growth nexus in Pakistan.     

Foreign direct investment and its impact on the Thai economy: the role of financial development

This paper examines the roles of foreign direct investment and financial development in the process of economic development using Thailand as the case study. We argue that better developed financial systems allow an economy to exploit the benefits of foreign direct investment more efficiently. The estimation draws upon an unrestricted error-correction model to avoid omitted lagged variable bias, and an instrumental variable estimator to correct for endogeneity bias. Using annual time series data from 1970 to 2004, the results show that financial development stimulates economic development whereas foreign direct investment impacts negatively on output expansion in the long run. However, an increased level of financial development enables Thailand to gain more from foreign direct investment, suggesting that the impact of foreign direct investment on output growth can be enhanced through financial development. The results are robust to different measures of financial development.      

Political culture and foreign direct investment: The case of Italy

Does the political culture of an area have any impact on the foreign direct investment (FDI) decisions of multinational corporations (MNCs)? This question is difficult to address empirically, as locations differ in many dimensions. We therefore address this question by examining MNC investment location decisions with regard to different regions within a single country. The country we examine is Italy, which exhibits one of the highest levels of variation with regard to the political culture of its geographical regions. We find that political culture as represented by the pattern of support for political parties at different points on the political spectrum has a significant impact on the MNC investment location decision. Thus, in choosing between locations on a short list, where economic and financial location factors are roughly similar, political culture can have a determining influence. In the case of Italy, a Center-right orientation is conducive to MNC FDI, while a Center-left orientation is not. A Far-left orientation is found to have a very negative effect on FDI.     

Crises, portfolio flows, and foreign direct investment: An application to Turkey

We analyze how financial and economic crises affect the relation between the components of capital flows and their determinants in an emerging economy. Our results suggest that the composition of capital flows matters, crises can explain the volatility of portfolio flows and foreign direct investment, and modeling them as endogenous breakpoints improves the results considerably. By using data from the Turkish economy, we estimate these breakpoints together with the parameters of the model and find that they correspond to international and domestic crises that hit the country. Although both components are affected by similar crises, direct investment reacts strongly to the domestic crisis, while portfolios flows are more sensitive to global financial conditions. Breaks also have an effect on the significance and sign of determinants of each type of international investment. Evidence indicates changes in all coefficients in both investment types and suggests that analyses assuming parameter constancy lead to misleading results if they ignore the influence of endogenous breaks.     

The role of inward foreign direct investment on entrepreneurship

This paper investigates whether foreign firms had a positive impact on entrepreneurial activity measured by the net creation of firms. Using firm-level panel data for the Portuguese manufacturing and service industries over the period 1986 to 2000, we test whether the impact of foreign firms on firms’ entry depends on the number and size of previous foreign entrants. Overall, the results cast some doubts on the influence of foreign firms in assisting entrepreneurial activity. The impact of a first foreign investment is, in general, positive but the marginal impact of additional investments appears to be negative.     

Project financing,entrepreneurial activity,and investment in the presence of asymmetric information

We analyze a two-period signaling model in which a representative entrepreneur in a regional economy has a project that generates a random cash flow and that requires investment that the entrepreneur raises from a competitive market. The project's type is known to the entrepreneur but not to the investors. Further, the entrepreneur is restricted to issuing debt only or equity only. We first show that there is no separating perfect Bayesian equilibrium (PBE) contract involving the issuance of equity only, that there exists a pooling PBE contract involving the issuance of equity only, and that a debt contract is preferred to an equity contract by our entrepreneur. Next, we suppose that the entrepreneur incurs a non-pecuniary cost of financial distress F > 0 whenever he is unable to make a repayment at time t = 1. We provide conditions on F under which a pooling PBE contract with debt exists and a separating PBE contract with debt and equity exists. Finally, we examine whether a high type entrepreneur will prefer a setting with a cost of financial distress (F > 0) or a setting in which there is no such cost (F = 0).     

Capital account liberalization and foreign direct investment

We examine the impact of capital account policies on FDI inflows. Using an annual panel dataset of 83 developing and developed countries for 1984-2000, we find that capital account openness is positively but only very moderately associated with the amount of FDI inflows after controlling for other macroeconomic and institutional measures. To a large extent, other country characteristics seem to determine FDI inflows instead of capital account policies. We also find that capital controls are easily circumvented in corrupt and politically unstable regimes. We conclude that liberalizing the capital account is not sufficient to generate increases in inflows unless it is accompanied by a lower level of corruption or a decrease in political risk.     

Regional trade agreement and foreign direct investment

This paper investigates the relationship between regional trade agreements, such as the NAFTA, and FDI. Using a fixed-effects gravity model to estimate OECD panel data spanning 1982–1997, we learn that trade integration encourages FDI. We find specific evidence for each of the NAFTA member countries—Mexico, Canada and the United States. In addition, we find evidence that FDI will rise with host and parent country GDP and fall with distance.     

The determinants of foreign direct investment: An analysis of US manufacturing industries

This study explores the determinants of foreign direct investment by analyzing the variation across US manufacturing industries in the extent of outward foreign direct investment. Three types of industry characteristics are hypothesized to explain this variation. Empirical support is found for four sources of ownership-specific advantages favoring foreign direct investment, new technology created through research and development, marketing abilities, organizational techniques and capital cost advantages. Support is found for the role of production scale economies in favoring centralization and hindering foreign direct investment, but results suggest only a weak role for transport costs in favoring decentralization and foreign direct investment. Producer concentration, perhaps reflecting oligopolistic competition, is positively related to foreign direct investment.