The role of direct foreign investment in developing east asian countries

Conclusion purpose of this paper has been to provide an overview of the role and extent of foreign investment in East Asian developing countries. We have not been concerned with the costs and benefits of DFL Rather, we have attempted to integrate the scattered and limited information on DFI into recent empirical research on the subject. Many of the issues concerning DFI can be examined only through detailed case studies, and our paper is intended to be complementary to such research. Several conclusions emerge from our study. First, DFI constitutes a substantial but still relatively minor source of the total resource inflows to the region, and a very small proportion of total domestic investment. Secondly, although there have been changes in the“packaging” of capital and technology inflows, these changes do not appear to be as great as is sometimes suggested. Thirdly, there are significant differences in the nature and extent of DFI among the investing countries. Fourthly, the importance of DFI varies markedly within the manufacturing sector, and these variations can be explained, at a general level, with reference to the theory of DFI. Fifthly, the phenomenon of intra-firm trade in manufacturing does not appear to be particularly important in the case of United States investment, but it is significant in the rapidly expanding Japanese investments abroad.     

The role of foreign direct investment in the host-country firm selection process: firm-level evidence from Slovenian manufacturing

This paper examines the role of inward foreign direct investment (FDI) in firm selection processes in the Slovenian manufacturing sector in the 1994–2003 period. It adopts the firm dynamics framework that allows testing of selection effects directly by assessing the impact of foreign firms’ activity on the probability of exiting of local firms (crowding out). The results show that intra-industry productivity spillover effects offset only a minor part of the competition pressure which results from foreign firm entry, hence incumbent firms experience a drop in their survival probability upon a foreign firm’s entry within a particular industry. This result is driven by foreign firm entry of the greenfield type, as entry through the acquisition of existing firms has no significant effect. The strength of the crowding-out effect decreases with the incumbent firm’s export propensity. There is no significant evidence that inward FDI would stimulate the selection process through backward linkages in the upstream supplying industries, whereas foreign firms’ activity reduces the exit probability of downstream local customers (through forward linkages).     

The impact of foreign direct investment on wages and employment

This paper studies the impact of foreign direct investment (FDI)on wages and employment When labor-management bargaining isindustry-wide, two effects of FDI are identified; the collusioneffect and the threat-point effect. It is shown that: (i) FDIalways reduces the negotiated wage; (ii) FDI reduces union employmentand the competitive wage if die union cares more about employmentthan wages or is equally concerned about employment and wages.However, if labor-mingement bargaining is firm-specific andunionization is industry-wide, then the above effects of FDIare substantially reduced.     

The effects of foreign aid,foreign direct investment and domestic investment on economic growth in African countries: Nonlinearities and complementarities

This paper examines the relationship between foreign aid (AID), foreign direct investment (FDI) and domestic investment (DI) and its effects on economic growth in 41 African countries. Annual panel data from 1990 to 2016 are examined using fixed‐effects (FE) and system‐GMM estimators. We test the existence of nonlinearities and complementarities in the relationship between AID–FDI, AID–DI, FDI–DI, and AID–FDI–DI. Empirical results confirm the existence of a nonlinear relationship between AID, FDI, DI, and economic growth. Besides, the results show that AID and FDI have a significant positive complementing effect on economic growth. It is shown also that FDI complements DI, while the coupled effect of AID and DI remains weak in catalyzing growth. Moreover, the results indicate that the complementarity between AID–FDI–DI positively influence economic growth, revealing that AID and FDI work as a complement factor to DI and enhance its effectiveness in promoting economic growth. These insights have important policy implications. Policy‐makers in African countries are well advised to implement concrete policy measures suitable for building on the growth momentum created by foreign capital inflows, like FDI, AID as well as remittance.     

Large scale direct OPEC investment in industrialized countries and the theory of foreign direct investment — a contradiction?

Zusammenfassung Umfangreiche OPEC Direktinvestitionen in Industriel?ndern und die Theorie ausl?ndischer Direktinvestitionen — Ein Widerspruch ? — Dieser Aufsatz befa\t sich mit dem Ausma\, in welchem die Verm?gensverschiebung zugunsten ?lexportierender L?nder zu umfangreichen Direktinvestitionen in wichtige Privatunternehmen der Industriel?nder durch die Regierungen oder private Interessenten aus den ?lexportierenden L?ndern führen wird. Die Arbeit kommt zu dem Ergebnis, da\ umfangreiche Direktinvestitionen von OPEC-Mitgliedstaaten in den meisten Industriel?ndern unwahrscheinlich sind. Ein gegenteiliges Ergebnis würde den Fakten und der bestehenden Theorie über die Bestimmungsgründe ausl?ndischer Direktinvestitionen widersprechen und die Erfahrungen mit dem früheren Verhalten der OPEC-Investoren vernachl?ssigen. Es wird gefolgert, da\ ausl?ndische Direktinvestitionen in den L?ndern etwas wahrscheinlicher sind, deren Kapitalm?rkte für Portfolio-Investoren nicht leicht zug?nglich sind.

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Résumé L–investissement direct de grande échelle d–OPEC dans les pays industrialisés et la théorie d–investissement direct étranger — Une contradiction ? — Cet article adresse la dimension d–investissement direct de grande échelle, causé par le mouvement de la prospérité vers les pays exportant le pétrole, dans les importantes entreprises privées par le gouvernement ou les intérêts privés des nations exportant le pétrole. L–article conclut que l–investissement direct étranger de grande échelle dans les pays les plus industrialisés par les membres d–OPEC soit improbable. Une conclusion opposée contrasterait avec la théorie existante et l–évidence sur les déterminants d–investissement étranger et ignorerait l–évidence de la conduite passée des investisseurs d–OPEC. Il est conclu que l–investissement direct étranger est peut-être plus probable dans les pays où les marchés de capital n–offrent pas un accès prêt pour les investisseurs de portefeuille.

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Resumen Inversiones directas de gran escala de países miembros de la OPEP en países industrializados y la teoría de las inversiones extranjeras directas — Una contradicción ? — Este artículo se refiere a la medida con que la desviación de riqueza hacia los países exportadores de petróleo se manifestará en inversiones directas de gran escala en empresas privadas de gran envergadura por el gobierno o intereses privados de las naciones exportadoras de petróleo. El trabajo concluye, que inversiones directas de gran escala en la mayoría de los países industrializados por países miembros de la OPEP son poco probables. Una conclusión contraria entraría en conflicto con la teoría existente y con las evidencias sobre las determinantes de la inversión extranjera directa e ignoraría testimonios sobre el comportamiento pasado de los inversionistas de los países de la OPEP. Se concluye que inversiones extranjeras directas occurrirán con mayor probabilidad en países en que los mercados de capital no proveen acceso inmediato a inversores de portafolio.

     

Incentives and disincentives for foreign direct investment in less developed countries

Zusammenfassung Anreize und Hemmnisse für ausl?ndische Direktinvestitionen in Entwicklungsl?ndern. — Dieser Aufsatz analysiert, wie sich die Politik von Entwicklungsl?ndern auf den ZufluΒ ausl?ndischer Direktinvestitionen und deren Wirksamkeit auswirkt. Eine gewisse Stütze findet die Hypothese, daΒ sowohl das AusmaΒ als auch die Wirksamkeit ausl?ndischer Direktinvestitionen in den L?ndern mit einer Exportf?rderungsstrategie h?her sind als in L?ndern, die mit der Importsubstitutionsstrategie die Industrialisierung f?rdern wollen. Die Arbeit untersucht auch den EinfluΒ der protektionistischen Politik auf die Wahl der Techniken, die ausl?ndische Firmen in den Entwicklungsl?ndern anwenden. Der letzte Teil gibt einen kurzen überblick über Vorteile und Kosten verschiedener MaΒnahmen der Entwicklungsl?nder, die den Zweck haben, die Bet?tigung ausl?ndischer Firmen zu regulieren.

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Résumé Incitations et désincitations pour l’investissement direct étranger dans les pays en voie de développement. — Cet article analyse les effets des politiques des PVD sur les influx des investissements directs étrangers et son efficacité. L’auteur trouve quelque support pour l’hypothèse que la dimension des influx des investissements directs étrangers et l’efficacité de tels investissements sont plus considérables dans les pays qui appliquent une stratégie de la promotion d’exportations que dans ceux qui suivent une stratégie de la substitution d’importation. L’article examine aussi les conséquences des politiques protectionnistes pour la choix des techniques appliquées par les entreprises étrangères dans les PVD. La part finale de l’article donne une revue brève des bénéfices et coüts des politiques différentes des PVD désignées pour régulariser les opérations des entreprises étrangères.

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Resumen Incentivos y desincentivos para inversiones extranjeras directas en pafses en desarrollo. — En este artfculo se analiza el impacto de las polfticas de los paises en desarrollo sobre los influjos de inversion extranjera directa y su eficacia. Se encuentra algün apoyo para la hipotesis que tanto la magnitud de los influjos de inversiones extranjeras y su eficacia tienden a ser mayores en pafses que persiguen la estrategia de promotion de exportaciones en relación a aquéllos que persiguen una estrategia de industrializaci?n sustitutiva de importaciones. También examina el impacto de politicas proteccionistas sobre la elección de tecnologfa de empresas extranjeras en paises en desarrollo. La ültima secci?n del artfculo proporci?na un breve recuento de los costos y beneficios de las distintas politicas de los paises en desarrollo disenadas para regular la operaci?n de firmas extranjeras.

     

Trade effects of foreign direct investment: Evidence for Taiwan with four ASEAN countries

Trade Effects of Foreign Direct Investment: Evidence for Taiwan with Four ASEAN Countries. —This paper examines the trade effects of foreign direct investment (FDI) between Taiwan and each of the following four ASEAN countries: Indonesia, Malaysia, the Philippines, and Thailand. Regression results show that Taiwan's outward FDI has a significant positive effect on exports to and imports from the host country, whereas no such effects were consistently found for inward FDI from the same country.     

The impact of foreign direct investment on export structure and employment generation

The literature on foreign direct investment often treats its determinants and consequences independently. This is particularly so for empirical studies. The purpose of this paper is to consider both aspects simultaneously and to provide some empirical evidence on the nature of foreign investment and its impact on export structure and employment generation. The method consists of a model which includes both industry-specific and location-specific determinants of foreign direct investment in the export sector and their effects on the employment generating capacity of individual manufacturing industries. It is estimated for three-digit S.I.C. industries in Puerto Rico in 1979. The results suggest that Puerto Rico's export sector consists of US based firms producing on a large scale. These firms are primarily attracted to the island by relatively higher profits than on the mainland. Low wage labor is not considered an important inducement to foreign investment in Puerto Rico. The labor intensity of the island's export sector lags behind that of comparable countries due to the capital-intensive nature of its principal exports. The island's manufacturing employment can be more effectively increased by altering the composition of exports than by inducing present firms to hire more workers.     

Internalisation as a general theory of foreign direct investment: A critique

Conclusions The theory of internalisation does provide an explanation of certain types of FDI activities by MNEs. In particular, there are three areas where internalisation appears to provide an explanation of FDI as a specific form of international involvement by the MNE: these entail vertical integration, transfer pricing and quality control [Buckley, Casson, 1976; Casson, 1983].     

Does China have an impact on foreign direct investment to Latin America?

We analyze empirically whether the emergence of China as a large recipient of FDI has affected the amount of FDI received by Latin American countries. Allowing for the structural break related to China's WTO accession, we found a significant negative impact of Chinese inward FDI on that of Mexico until 2001 and on that of Colombia after that date. The rest of Latin American countries do not seem to be affected by Chinese inward FDI. For the region as a whole, there is no significant Chinese effect on Latin America’s FDI.     

The impact of affinity on world economic integration: The case of Japanese foreign direct investment

This paper finds that a country's affinity with a foreign country has a positive effect on foreign direct investment flows from it to that country, by analyzing Japanese foreign direct investment outflows during the period of 1995–2009. A rise in a country's affinity with a foreign country is thought to enhance its trust in that country and as a result lower the transaction costs of its economic activities with it, thereby helping to promote its foreign direct investment flows to the country. These findings imply that a rise in affinity among countries is likely to facilitate international economic integration.     

Determinants of foreign direct investment in Cambodia

This paper analyses the determinants of the factors that might influence inward FDI in Cambodia by referring to its economic, geographic, and political characteristics. Using exclusive unbalanced panel data sets during 1995–2005, for both approved and realized FDI for, respectively, seventeen and fifteen home countries, the estimation results show that the determinants of approved FDI and realized FDI are somewhat similar. The FDI home country's GDP, its bilateral trade with the host country and the exchange rate have a positive impact on inward FDI flows into Cambodia. As expected, geographic distance negatively affects the level of FDI inflows in Cambodia.     

The impact of foreign direct investment and human capital on economic growth: Evidence from Chinese cities

Using a panel of Chinese cities over the period 1991–2010, we examine the determinants of economic growth, focusing on the role of foreign direct investment (FDI) and human capital. Consistent with the predictions of a human capital-augmented Solow model, we find that the growth rate (along the path to the steady-state income level) of per capita GDP is negatively correlated with population growth rate and positively correlated with investment rate in physical capital and human capital. We find that FDI has a positive effect on the per capita GDP growth rate and this effect is intensified by the human capital endowment of the city. The latter suggests that one way that human capital contributes to growth is to serve as a facilitator for technology transfers stemming from FDI. Furthermore, we find some suggestive evidence that the FDI-human capital complementary effect is stronger for technology-intensive FDI than for labor-intensive FDI. Our results are robust to alternative measures of human capital, model specifications, and estimation methods.