Multinational enterprise strategy,foreign direct investment and economic development: the case of the Hungarian banking industry

This paper examines foreign direct investment (FDI) in the Hungarian economy in the period of post-Communist transition since 1989. Hungary took a quite aggressive approach in welcoming foreign investment during this period and as a result had the highest per capita FDI in the region as of 2001. We discuss the impact of FDI in terms of strategic intent, i.e., market serving and resource seeking FDI. The effect of these two kinds of FDI is contrasted by examining the impact of resource seeking FDI in manufacturing sectors and market serving FDI in service industries. In the case of transition economies, we argue that due to the strategic intent, resource seeking FDI can imply a short-term impact on economic development whereas market serving FDI strategically implies a long-term presence with increased benefits for the economic development of a transition economy. Our focus is that of market serving FDI in the Hungarian banking sector, which has brought improved service and products to multinational and Hungarian firms. This has been accompanied by the introduction of innovative financial products to the Hungarian consumer, in particular consumer credit including mortgage financing. However, the latter remains an underserved segment with much growth potential. For public policy in Hungary and other transition economies, we conclude that policymakers should consider the strategic intent of FDI in order to maximize its benefits in their economies.     

Foreign Direct Investment in China: Reward or Remedy?

This paper tests the significance of FDI as a way to alleviate credit constraints. Incoming foreign investment provides additional sources of capital. Specifically in the Chinese case, enterprises may look for foreign investors, being constrained in their activity due to distortions in the state‐dominated system. First, the Chinese financial system allocates resources to the least efficient firms – state‐owned enterprises – while denying the same resources to Chinese private enterprises, forcing them to look for a foreign investor. Second, the inefficient system of state investment planning leads to mismanagement of public enterprises, increasing ‘insolvency‐induced FDI’. We propose to analyse determinants of FDI in Chinese provinces to test the above hypotheses. We control for traditional determinants of FDI such as market access, labour costs, productivity, infrastructure, reform advances and banking sector size in order to assess the impact of inter‐provincial heterogeneity in terms of the access that private enterprises have to credit and the distortive management in state‐owned firms.     

Why on Earth Should Foreign Banks Invest in Africa's Financial Services Sector? Evidence from Financial Multinationals in Ghana

While sub‐Saharan African countries have been able to attract some degree of resource‐seeking foreign direct investment (FDI) due to their abundant natural resources, financial FDI inflows have proved to be elusive for the region, in spite of the widespread financial‐sector adjustment programs that offer attractive incentive packages for financial multinational corporations (MNCs). Literature surrounding the determinants of FDI inflows has mainly focused on manufacturing and real production activity. We analyzed the root causes of the weak administrative and institutional framework in Africa's banking industry, using Ghana as a case in point. Focusing on two financial MNCs as case studies, this article validates the significance of a thorough qualitative investigation in evaluating the explanations as to why most foreign banks do not invest in sub‐Saharan Africa and why the few that do have relatively insignificant operations. The study also reveals that despite the far‐reaching reforms, there are several structural constraints and deficiencies placed on financial MNCs that affect the size of the business they can conduct and their future investment decisions. One of the major issues prior to the financial‐sector reforms in Africa was disintegration, and the restructuring was not designed to create an attractive location for foreign capital; hence, the low financial FDI inflows to Ghana in particular and Africa in general. © 2015 Wiley Periodicals, Inc.     

Causes of Financial FDI Inflows into Sub‐Saharan Africa (SSA): Evidence from Ghana

The main aim of this article is to examine the factors that influence the inflow of financial foreign direct investment (FDI) into SSA and to understand foreign investors’ perceptions of the role of institutional factors in facilitating financial FDI inflows and the extent to which the postreform business environment has been successful in attracting financial FDI inflows into SSA. An in‐depth qualitative study was adopted for the research. Using two financial multinational corporations as case studies, the environmental factors that influenced their decision to choose Ghana as an investment destination are examined, as well as the institutional and regulatory factors that affect their current operations and future investment decisions. © 2014 Wiley Periodicals, Inc.     

FDI流入与服务业市场结构变迁——典型行业的比较研究

随着中国加入WTO承诺的履行,中国服务业对外开放程度大大提高,外商对我国服务业的投资出现了持续和大幅度增长的趋势,同时,服务业市场结构的变化也是有目共睹的。本文对代表典型市场结构的三个服务行业(零售业、银行业和保险业)进行比较研究,认为,FDI是决定中国服务业市场结构变化的主要原因,而对于三个不同的行业而言,作用的方向和强度也有显著区别。本文分析了可能的影响因素和相应的政策建议。     

Regional determinants of inward FDI distribution in Poland

In this paper we examine the location determinants of the inflow of foreign direct investment (FDI) into Poland, at a regional level. Using survey data from an on-line questionnaire in February 2005 and a multinomial logit model incorporating the investor's specific characteristics, we show that knowledge-seeking factors alongside market and agglomeration factors, act as the main drivers for the inflow of FDI to the Mazowieckie region (including Warsaw), while efficiency and geographical factors encourage FDI to the other areas of Poland. Some implications are drawn for FDI attraction policy in Poland.     

Political risk and the internationalization of firms: An empirical study of Canadian‐based export and FDI firms

Political risk analysis primarily receives attention for foreign direct investment (FDI) but only rarely for exporting. We examine how exporters and foreign direct investors evaluate the relative importance of political risk factors. We provide a rationale for exporters to evaluate political risk factors for FDI and for foreign direct investors to evaluate political risk factors for exporting. Survey data were collected from Canadian exporters and foreign direct investors and capture the distinctive nature of salient factors for exporting and FDI. We offer unique insights on the evolutionary character of political risk that are of practical value for both exporting and FDI. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.     

Foreign banking in developing countries; origin matters

Driven by globalization and increased financial integration, the last decade has seen many foreign banks entering developing countries. Although the majority of these banks are from high-income countries, recently banks from developing countries have followed suit. This paper looks at this phenomenon, by examining the differences and similarities between developing and high-income country foreign banks. Using a large dataset on banking sector FDI in developing countries, we find that 27% of all foreign banks in developing countries are owned by a bank from another developing country, while these banks hold 5%of the foreign assets. The importance of developing country foreign banks is much larger in low-income countries (both in number of banks and in terms of assets) and this type of foreign banking is strongly regionally concentrated. Although foreign bank entry by both developing country as well as high-income country banks seems to be driven by economic integration, common language and proximity, banks from developing countries are more likely to invest in small developing countries with weak institutions where high-income country banks are reluctant to go. This result seems to suggest that developing country banks have a competitive advantage dealing with countries with a weak institutional climate. Furthermore, our results indicate that developing country foreign banks have a higher interest margin and are less profitable than foreign banks from high-income countries.     

欠发达地区外商直接投资经济增长效应分析——以江西赣州为例

外商直接投资的经济增长效应受多种因素影响,各地情况不同,其效应表现也不一致。文章根据内生经济增长理论,以中西部地区的江西赣州为例进行实证分析。研究表明,相对于劳动力投入和国内资本投入,欠发达地区外商直接投资对经济增长的作用十分有限。这主要是因为,利用外资的总体规模仍然很小;外资产业规模小,层次低,技术含量低;外资产业与本土产业配套发展不足。但由于外商直接投资将在长期内拉动经济增长,因此必须重视外资的引进,并不断提高外资的质量。     

The role of corporate governance in FDI decisions: Evidence from Taiwan

There has been a considerable literature on the determinants of why firms undertake foreign direct investment (FDI), but very little on whether firms with different governance characteristics are more or less likely to venture overseas. For example, are family-controlled firms more predisposed to FDI than firms, with similar attributes, but different forms of ownership? Does the presence of institutional shareholders suggest a greater propensity to invest abroad? Does the composition of the Board of Directors have an impact? Most extant studies of corporate governance focus on the impact of governance factors on firm performance. However, these performance outcomes are a function of the strategic decisions made by the firms, which suggests it might be useful to consider the relationship between corporate governance factors and particular strategic decisions. One example is the decision to undertake foreign direct investment. The two main strands of IB literature on the determinants of FDI have little or nothing to say about how corporate governance factors might affect the FDI decision. Both internalisation theory and the resource-based view see FDI primarily as a means by which firms can appropriate rents in overseas markets from the exploitation of their idiosyncratic resources and capabilities. This paper extends this literature by investigating the effects of governance factors on the decision to undertake FDI. In particular, we want to assess the impact upon the FDI decision of (a) the extent of family control, (b) the presence of domestic and foreign institutional shareholders, and (c) the composition of the Board of Directors. We investigate these effects using a sample of 228 publicly listed firms in Taiwan, and our results clearly indicate that family control and share ownership by domestic financial institutions in Taiwanese firms are associated with the decision to undertake FDI. We also find that corporate governance impacts in different ways with regard to Taiwanese FDI in China in comparison to Taiwanese FDI in the rest of the world.     

Institutional Determinants of Foreign Direct Investment

In this paper, we contribute to the literature on the determinants of foreign direct investment in developing countries and re‐evaluate the role of the quality of institutions on FDI independently of the general level of development. We implement cross‐section estimations based on a newly available database with unprecedented detail on institutions for a set of 52 countries, as well as panel data estimations based on Fraser Institute's data. Furthermore, we control for the correlation between institutions and GDP per capita and for endogeneity of institutions. Finally, we evaluate whether the similarity of institutions between the host and the origin country raises bilateral FDI. We find that a wide range of institutions, including bureaucracy, corruption, but also information, banking sector and legal institutions, do matter for inward FDI independently of GDP per capita. Interestingly, weak capital concentration and strong employment protection tend to reduce inward FDI. Institutional proximity between the origin and the host country also matters, but we find little impact of institutions in the origin country. These results are encouraging in the sense that efforts towards raising the quality of institutions and making them converge towards those of source countries may help developing countries to receive more FDI, independently of the indirect impact of higher GDP per capita. The orders of magnitude found in the paper are large, meaning that moving from a low level to a high level of institutional quality could have as much impact as suddenly becoming a neighbour of a source country.     

The determinants of foreign direct investment in China: The case of Taiwanese firms in the IT industry

This study illustrates the factors that affect a firm's intention to engage in foreign direct investment (FDI) in China, using Taiwanese firms in the Information Technology (IT) sector as an example. By building upon the literature, we investigate a firm's decision to engage in FDI by taking industry and firm factors into consideration. This study applies an event history technique to perform an empirical analysis, taking into account the conditional probability of the element of time. These factors are analyzed in a dynamic context using a sample of 667 Taiwanese firms in 10 industries between 1996 and 2005. We find that network linkages, the expansion of markets, and China's incentive policies positively affect the intention to engage in FDI. A firm with a higher degree of export orientation and larger firm size also has a strong effect on motivating FDI.     

Foreign Direct Investment and De‐industrialisation

The purpose of this study is to discuss the various issues regarding de‐industrialisation and to systematically analyse the causes of this phenomenon. In addition, the effect of the recent increase in foreign direct investment on de‐industrialisation will be analysed. Unlike extant studies, this study employs a more reliable method of estimation, known as the generalised method of moments system, for establishing the importance of foreign direct investment (FDI) with regard to de‐industrialisation. For a general assessment of the different factors of de‐industrialisation, including FDI, this study classifies the causes of de‐industrialisation in OECD countries into external and internal factors. As a result, the analysis has proved that not only internal and external factors are major factors of de‐industrialisation, FDI inflow and outflow are also major factors.     

Problems of foreign subsidiaries of SMEs compared with large companies

This paper draws on institutional theory, supplemented with foreign direct investment (FDI) theory, to explain the level of problems encountered by foreign subsidiaries of Japanese small- and medium-sized enterprises (SMEs) and compares them with large companies. The study confirms the importance of institutional factors such as institutional distance, legitimacy, and the state's coercive influence, as well as factors that FDI theory suggests are associated with multinationals, such as high technology and industry concentration. SMEs differ from large companies in some of the operational areas in which their foreign subsidiaries face high levels of problems, but both seem challenged by problems with labor and low-price foreign competition.     

The impact of regulatory quality on intra-foreign direct investment flows in the ASEAN markets

Using a panel data set containing information on FDI flows from home to host countries, this paper examines the impact of changes in the quality of government regulatory effectiveness and governance practices upon the direction of outward FDI flows between five ASEAN economies of Indonesia, Malaysia, Philippines, Singapore, and Thailand. The results show that a deterioration in the effectiveness and enforcement of investment regulations (such as price controls and excessive regulation in foreign trade and business development) have an adverse effect upon intra-ASEAN FDI, and are significant factors in explaining the recent downward trend in ASEAN FDI flows. These results are robust to changes in a number of controlling variables for various economic conditions that the extant FDI literature consider. Also, these results have several significant implications for future policy makers in recommending means to revitalize intra-ASEAN investment.     

Infrastructure Development and FDI Inflow to Developing Economies: Evidence from India

Nowadays, developing economies are becoming the preferred destination of foreign direct investment (FDI) inflow. We draw insights from Dunning's eclectic paradigm to explore how FDI inflow is influenced by the quality of the physical infrastructure and human resources of the host country. We investigate various India‐specific infrastructural factors affecting FDI inflow between 1991 and 2010. Our empirical findings indicate that factors like railway transportation and road network as well as the quality of human resources played a crucial role in attracting FDI. However, air transportation or communication infrastructure is yet to play a significant role. Our study makes a modest attempt to identify areas of concern and scope for the further improvement of India's infrastructure facilities to attract foreign investment in the future. © 2016 Wiley Periodicals, Inc.     

我国引进外商直接投资影响因素的实证分析

外商直接投资(FDI)是中国经济发展中不可忽视的力量,改革开放以来,我国利用外资从零起步,实现了快速发展,取得了长足的进步,外资已逐渐成为发展经济和推动中外经贸交流的重要手段。本文在总量分析的层面上,从定性和定量两个角度研究了我国经济中的各因素对外商直接投资的影响。本文认为,在分析我国引进外商直接投资的影响因素时,不应该只考虑到各种经济环境因素,同时也应考虑到政策因素的影响。     

To What Extent Can Foreign Direct Investment Help Achieve International Development Goals?

For FDI to help alleviate absolute poverty and stimulate economic growth in developing countries, two conditions have to be met. First, developing countries need to be attractive to foreign investors. Second, the host‐country environment in which foreign investors operate must be conducive to favourable FDI effects with regard to overall investment, economic spillovers and income growth. This paper argues that it is more difficult to benefit from FDI than to attract FDI. The widely perceived concentration of FDI in few developing countries tends to obscure that, in relative terms, various small and poor countries are fairly attractive to FDI. Yet, the mobilisation of domestic resources remains by far, more important than attracting FDI for financing investment and stimulating economic growth. Furthermore, high inward FDI is no guarantee for poverty alleviation and positive growth effects. In particular, the empirical evidence suggests that host‐country conditions typically prevailing in poor countries, including weak institutions and an insufficient endowment of complementary factors of production, constrain the growth‐enhancing and poverty‐alleviating effects of FDI. The crux is that creating an environment in which FDI may deliver social returns will take considerable time exactly where development needs are most pressing.     

Explaining variability in the investment location choices of MNEs: An exploration of country,industry and firm effects

This paper examines the variation in foreign direct investment (FDI) location decisions of European multinational enterprises (MNEs.) An innovative empirical approach is applied to a new data set which contains over 15,000 individual FDI location decisions in 25 European countries over a 17-year period and combines country-, industry- and firm-level factors. The empirical results show that the responsiveness of FDI location choices to country-level factors is heterogeneous both across sectors and across firms of different characteristics as well as unobserved factors. For example, the results show that the importance of market size increases with investing firm’s size and skill intensity, while proximity between countries, as well as cultural and linguistic ties are more important for smaller firms.     

后危机时代人民币实际汇率波动 对我国FDI 流入的影响

汇率波动是影响FDI流入的重要因素。基于1994~2012年的时间序列数据,本文构建带有金融危机变量的模型和利用邹氏检验法对后危机时代人民币实际汇率波动与FDI流入的关系进行实证分析。经过实证检验发现,金融危机改变了人民币实际汇率波动与FDI流入之间原有的负相关关系,中国成为外资的"避风港"和外商规避贸易壁垒是后危机时代人民币实际汇率波动有利于FDI流入的两个主要因素。同时,人民币实际汇率的波动更加贴近市场实际汇率水平,会增加FDI的流入,有利于我国经济的发展与稳定。