Assessing the effects of policies on China’s outward foreign direct investment

This paper discusses the determinants of China’s outward foreign direct investment (OFDI) with a special focus on the role of government policy. In particular, we investigate the types of policies that are most influential in promoting OFDI. Our main contribution is to analyse, for the first time, China’s OFDI policies by means of quantitative indicators. We refine policies definitions and distinguish between Regulation Policies, Service Policies, Promotion Policies and Supervision Policies, and we develop a methodology for collecting, screening and coding policies; then we create new indices to capture different types of policies. We find that Regulation Policies, Service Policies and the general attitude of the government have significant effects on China’s OFDI at the national level.     

Does foreign aid mitigate the adverse effect of expropriation risk on foreign direct investment?

We construct a model of FDI, risk and aid, where a country loses access to FDI and aid if the country expropriates FDI. We show that: (i) the threat of expropriation leads to under-investment; (ii) the optimal level of FDI decreases as the risk of expropriation rises; and (iii) aid mitigates the adverse effect of expropriation risk on FDI. The empirical analysis employs data for 35 low-income countries and 28 countries in Sub-Saharan Africa, over the period 1983-2004. We find that risk has a negative effect on FDI and that aid mitigates but cannot eliminate the adverse effect of risk.     

The GDR’s foreign trade policy

Before the German Democratic Republic (GDR) achieved worldwide political recognition in 1972 and 1973 many Western observers were of the opinion that the GDR’s trade with Western industrialised countries was still not very developed. A closer look at this field of activity shows, however, a different picture.     

How do country regulations and business environment impact foreign direct investment (FDI) inflows?

How do multinationals choose which countries to invest in? This study addresses the essential question of the impact of regulatory variables in attracting or deterring foreign direct investment (FDI). We separate regulatory variables based on different stages of a firm’s life-cycle. Using World Bank data for 189 economies, we examine which host country regulatory factors influence inward FDI. We find that countries with stronger contract enforcement and more efficient international trade regulations attract more FDI. The interaction terms suggest that multinational companies are willing to trade-off a country's poorer institutional variable in return for another where the institutional variable is stronger. For example, multinationals are willing to invest in countries with less efficient entry and exit regulations in exchange for stronger contract enforcement. These results also have important implications for government policy reform.     

The changing structure of Pakistan’s foreign trade

A high degree of concentration on a few commodities in the export structure of Pakistan during more than a decade of economic planning reflects the typical weakness of many developing countries in generating adequate and stable external resources so badly needed to accelerate their development efforts.     

The country-of-origin lie: impact of foreign branding on customers’ willingness to buy and willingness to pay when the product’s actual origin is disclosed

If you think about the last television commercial for an Italian pasta brand you have seen, are you sure it is really Italian? In many cases, especially in the food sector, neither the company nor the product originate from the advertised country, meaning that the company is pursuing a foreign branding strategy and is trying to benefit from positive stereotypes customers have about the specific foreign country. By collecting both quantitative and qualitative data through a point-of-sale intercept survey, this article assesses the impact of alleged origins on customers’ willingness to buy (WTB) and willingness to pay (WTP) if the actual origin is disclosed. The sample consisted of 200 German customers who were asked to answer questions related to one of two hedonic products they had just bought. It is empirically shown that foreign branding has a positive impact on the brand’s performance. However, as soon as customers find out that they were misled with regard to the origin of the product, both their WTB and their WTP decrease. This study contributes to the knowledge on the role of products’ origins on customers’ WTB and WTP. In contrast to the vast majority of the studies in this field, the communicated origin of the product is based on a foreign branding strategy and not on the product’s actual origin. Consequently, it was possible to manipulate within-subject variables by disclosing the actual origin of the product. The results of our study suggest that foreign branding may be a successful strategy for companies to increase their customers’ WTB and WTP. At the same time, our results raise concerns about the suitability of foreign branding as a long-term marketing strategy, unless a company can successfully maintain its foreign image. Future research opportunities include the choice of consumers with a different cultural background, of other hedonic products or of utilitarian products.     

Hoping grey goes green: air pollution’s impact on consumer automobile choices

This paper examines to what extent, if any, natural environmental factors affect consumer purchase decisions regarding “green” products. We collect and combine several unique datasets to study the impact of air pollution on consumers’ choices of passenger vehicles in China. Exploiting cross-city variation, we find that air pollution levels negatively affect the sales of fuel-inefficient cars on average. This relationship, though, is U-shaped over the observed air pollution levels, in that fuel-inefficient car purchases rise with air pollution beyond some threshold. Furthermore, a city’s income level is a significant factor in this non-monotonic relationship, in the sense that consumers of higher-income cities are less likely to suffer this reversal. All these results are consistent with the literature’s theoretical predictions of hope. The rich findings of our study yield important implications to both marketers and policy makers.     

Does foreign direct investment promote institutional development in Africa?

Foreign direct investment (FDI) inflows into Africa have increased since the turn of the millennium, mainly due to FDI growth into African countries by multinational enterprises (MNEs) from developing economies. While African governments view this growth as a positive development for the continent, many governments in the West have raised concerns regarding the institutional impact of investments from developing economies. This paper examines the impact of FDI flows on institutional quality in African countries by distinguishing investments from developed versus developing economies. Previous empirical studies have found a significant relationship between FDI flows and institutional quality in African countries but regard the relationship as MNEs rewarding African countries for adopting institutional reforms. However, little attention has been paid to the reverse causality, i.e. that FDI can cause an institutional change in African countries. Using bilateral greenfield FDI flows between 56 countries during 2003?2015, we find no significant FDI effect from developed and developing economies on institutional quality in host countries. However, aggregate FDI flows from developed and developing economies have a significant positive effect on host country institutional quality but differ concerning the impact's timing. In contrast, we find no significant effect of FDI flows from China on host country institutional quality. Our results are robust to alternative measures of institutional quality.     

Is foreign direct investment a safer form of financing?

It has been common to attribute financial crises to short-term capital inflows, while foreign direct investment (FDI) is seen as a safer form of finance. The relationship between crises and the composition of capital flows is particularly relevant at present because the flow of capital to Latin America is becoming increasingly dominated by FDI. This paper asks whether the composition of capital inflows and of the stock of foreign liabilities is relevant for financial crises, be it their frequency, depth, or length. It explores the possible role of FDI as a benign form of external liability relative to other classes of liabilities, reviewing both analytical and empirical arguments.     

Do bilateral investment treaties attract foreign direct investment? The role of international dispute settlement provisions

This paper studies the effects of the strength of bilateral investment treaties (BITs) on foreign direct investment (FDI) activity. We develop an index for the strength of international dispute settlement provisions included in BITs in order to examine the role the content of BITs plays in attracting FDI. To this end, we make use of data from UNCTAD's International Investment Agreement Mapping Project and measure the provision strength of 2,571 BITs. Using panel data of bilateral and total FDI inflows and inward FDI stocks, we study the effect of BITs on FDI. Our main finding indicates that stronger international dispute settlement provisions in BITs are indeed associated with positive effects on FDI activity.     

The effect of outward foreign direct investment on home country's export: A case study on Taiwan, 1989–2006

The purpose of this study is to examine the effect of outward foreign direct investment (FDI) on home country's export in Taiwan since the late 1980s. By pooling the time series and cross-section data in a modified gravity model, the study analyzes the effect of outward FDI, both country by country and host groups as a whole, on Taiwan's exports. It is concluded that outward FDI has a complementary effect on home country's export in Taiwan, most significantly evidenced in China-bound investment, which accounted for most FDIs after the 1990s.     

How important is foreign direct investment for late industrialising countries?

While it has long been recognised that the process of development is necessarily linked to technology, the question of the efficiency of technological spillovers from foreign direct investment remains controversial. The following paper examines the theoretical background and then focuses on the case of Mexico, analysing the technological performance of multinational enterprises in that country.     

Does foreign investment benefit the exporting activities of Vietnamese firms?

Using firm-level data, this paper examines the effects of foreign investment on the exporting behaviour of domestic firms in the Vietnamese manufacturing and service sectors. Applying the Heckman selection model on panel data and following the Wooldridge approach, we find that investment by foreign firms has a significant positive effect on the decision of domestic firms in the same and upstream sectors to export. The proportion of exports of domestic firms declines through horizontal and forward linkages, but increases through backward linkages in the manufacturing sector. However, there is only weak evidence in support of export spillovers on domestic firms in the service sector. We also find that the presence of foreign firms has differing effects on the exporting activities of low- versus high-tech firms in the manufacturing sector.     

COVID-19’s impact on the U.S. labor market as of September 2020

Business Economics - This paper summarizes the impact of COVID-19 (through mid-September 2020) on the U.S. labor market through the lens of measures found in monthly Bureau of Labor...     

The impact of social cues on passengers’ travel experience

Despite the importance of social cues in service experience environments, little is known about the role of other customer perceptions (OCP) in the formation of passengers’ travel experience (PTE) and loyalty in public transportation. This study examines the impact of OCP on PTE and loyalty in public transportation and also investigates the moderating role of face-consciousness between OCP and PTE. Results revealed that all three dimensions of OCP have a positive effect on PTE, which consequently influences loyalty. More importantly, face-consciousness moderated the relationship between suitable behavior and PTE. Transport managers can benefit from these findings by considering the social environment as they design their services.     

The effect of win-back investment on lost consumers’ intention of reinitiating relationship

This research studies the effect of win-back strategy on reinitiating brand-consumer relationship (BCR) by examining three commonly adopted strategies, namely apology, tangible reward, and privilege. Empirical findings demonstrate that these strategies have different effects on consumers’ intention of reinitiating relationship (CIRR). More specifically, whereas consumers will show positive CIRR if a transgression brand employs the strategies of apology, tangible reward and privilege, consumers’ perception of apology has the most significant effect. In addition, this study also tests the moderating role of brand relationship quality on CIRR. Results show that if the brand-relationship quality prior to brand transgression is high, win-back strategies will have more positive effects on CIRR, and vice versa.     

A Service Perspective on IBM’s Brand

Today, global conditions challenge traditional views of management, marketing, and economics. The goods-dominant view, centered on the notion of production and consumption, is being subsumed by the service-dominant view, centered on the notion that business value is cocreated by interaction of economic entities. Here, we consider IBM and its brand, showing that it reflects - and always has reflected — the service-dominant view of value cocreation.     

The evolution of inter-organisational social capital with foreign customers: Its direct and interactive effects on SMEs’ foreign performance

Taking a longitudinal approach, we analyze how the evolution of different dimensions of social capital between an SME (Small and Medium enterprise) and its key foreign customers directly influences the firm’s foreign performance growth. Moreover, we utilize a contingency approach by introducing two dyad-specific characteristics into the analysis: psychic and geographic interorganizational distances. Our findings contribute to the international business literature on social capital and suggest that while an investment in social capital with distant foreign customers always reinforces SMEs’ foreign performance development, relational and cognitive social capital have the same positive effects only for low levels of interorganizational psychic distance.