The macroeconomics of commercial policy and the trade balance: A policy perspective

Given the continuing growth of foreign direct investment (FDI) in the United States, there is a growing interest in examining its impact on the rate of economic growth. The immense literature on economic growth in the United States is composed of studies that concentrate on measuring the domestic variables that affect U.S. economic growth. However, the impact of foreign direct investment on the economic growth of the United States has not received the attention that is deserves. The purpose of this study is: (1) to examine the determinants of economic growth in the United States over time, and (2) to see if there is any time-series support for the FDI-led growth hypothesis in the United States. To achieve these goals the study uses a model that is based on the postulates of de Mello. Employing a 40-year period of annual data, the model is estimated by using the Beach Mackinnon technique which corrects for autocorrelation. The estimation results suggest the following conclusions: 1. The major determinants of economic growth in the United States are total factor productivity growth, domestic investment growth, and foreign direct investment growth. 2. Causal relationships between foreign direct investment growth and economic growth is uni-directional, running from foreign direct investment to economic growth. 3. Causal relationships between foreign direct investment growth and total factor productivity growth is uni-directional, running from foreign direct investment to total factor productivity. These findings suggest that foreign direct investment growth has a significant impact on the United States economic growth. Additionally, foreign direct investment has a significant impact on total factor productivity in the United States, further contributing to the United States’ economic growth. This calls on the U.S. policy makers to devise policies that are conducive to increasing the amount of foreign direct investment in this country.     

Motives for foreign direct investment in the United States

As foreign direct investment becomes an important element of the global marketplace it is important to understand why firms use FDI as an investment option. This article reports research that identifies motivations that influence factor‐ and market‐seeking inward FDI in the United States. Based on a study of 127 foreign companies investing in the United States, the research identifies motivators that differentiate and explain these two types of investment behaviors. © 2003 Wiley Periodicals, Inc.     

From NAFTA to hemisphere free trade

Limiting NAFTA to only the United States, Canada and Mexico will have immediate and adverse effects on the economies of the Caribbean Basin and Latin America. The diversion of investment and trade alone will result in the shrinking of these economies which have been growing steadily for the last few decades. Bernai discusses the advantages of expanding NAFTA to include these overlooked regions and constructs a transparent and fair process by which these countries of diverse economic development could obtain accession.     

Multinationals and the investment provisions of the nafta

The foreign direct investment (FDI) provisions of the North American Free Trade Agreement (NAFTA) are examined in light of a worldwide trend toward liberalization of the policy environment for multinational firms. We first examine the rationale for entering into international investment negotiations from the perspective of the three signatories—Canada, Mexico, and the United States—and then analyze the accomplishments embodied in the resulting investment provisions. We also briefly address areas where these provisions could be strengthened and that may be on the agenda of future international trade and investment negotiations, whether in other fora or during negotiations involving accession of new member states to the NAFTA.     

中国FDI激增对东南亚FDI的影响:基于1986-2001年板面数据的分析

近几年来,针对中国对外直接投资流入量激增这一现象,有些学者认为其挤占了东南亚经济体的投资。本文采用固定因素估计量,运用FDI区位决定因素模型来测算中国FDI与东南亚经济体FDI之间的关系。结果表明,1986-2001年间中国是提高而不是分流了其邻国的FDI。     

Automotive foreign direct investment in the United States: Economic and market consequences of globalization

This article examines the substantial growth of foreign direct investment into the United States by international (i.e., non-domestic) automotive firms over the past quarter century. Global macro-environmental factors influencing this investment are examined, as are the resulting impacts on numerous stakeholders including global automotive firms, consumers, and regional and state economies. The findings illustrate effective adaptive strategies that both automotive firms and economic development stakeholders follow in an increasingly global environment, resulting in significant economic, market, and quality-of-life benefits. The stakeholder perspective affords a more comprehensive view of globalization, forwarding a position counter to the protectionist viewpoint often espoused in business and popular culture.     

Impact of ownership and location factors on service multinationals' internalisation

Foreign direct investment in the service sector has been gaining importance in the past decade as more countries transform themselves into post-industrialised economies. The transition from a centrally planned economy to market-based economy has generated a surge of foreign direct investment from industrialised countries to Central and Eastern European Countries. This paper examines the impact of ownership and location factors on the extent of internalisation for service multinationals seeking to enter into the Czech Republic, Hungary, and Poland, as these countries launch their economies towards increased privatisation, deregulation, and liberalisation. Using foreign direct investment data of 76 firms during 1990–2000, we find significant support for our main hypotheses.     

The investment development path of newly developed countries

According to foreign direct investment (FDI) path theory, developed countries are grouped into two phases, known as the fourth and fifth phases. Fourth‐phase countries (newly developed economies) show a technological and institutional “gap” in comparison with fifth‐phase economies, which explains their lesser capacity to generate direct investment. We found that these countries, which were less developed economies in the 1980s, had undergone a deep structural transformation. This transformation encouraged the multinationalization of firms, which is a differentiating element and one outcome of their development process. These results have clear policy implications: the governments of newly developed countries should take steps to increase the endowment of knowledge‐intensive assets. The main contribution of this paper is the theoretical reformulation of the fourth phase of the investment development path theory.     

A Canadian perspective on NAFTA

Although most analysis of the North American Free Trade Agreement (NAFTA) has focused on the bilateral relationship between Mexico and the United States this article concentrates on the larger trading and investment linkages of Canada and the United States. From a Canadian perspective the NAFTA is an extension of (and improvement upon) the Canada–U.S. Free Trade Agreement (FTA) of 1989. The FTA introduced new dispute settlement mechanisms that Canada views as essential to partially offset U.S. administered protection. The new rules-based system of the FTA is also the basis for the NAFTA, and it has been extended from the trade law regime to cover foreign investment disputes. All three parties in NAFTA will benefit from a rules-based system rather than the power-based system that permits U.S. producer interests to exploit the size asymmetries between the large triad market of the United States and the smaller open trading economies of Mexico and Canada. © 1995 John Wiley & Sons, Inc.     

中国吸引外资对东南亚国家吸引外资影响的实证研究

中国吸引外资的浪潮引起了人们普遍的忧虑,中国吸引外资是否会导致流入东南亚国家的外资逐渐减少。本文在假定外资的供应是有弹性的前提下,利用对外投资区位决定因素的模型和固定效应分析方法来检验中国吸引外资与东南亚经济体吸引外资间的关系。结果显示在1986年至2001年间,中国吸引外资的增长实际上提高了邻国经济吸引外资的能力,而不是排挤了邻国外资的流入。     

Why has the United States continued to receive net investment income as a debtor country?

Why has the United States been able to keep receiving net international investment income as a debtor country? Several authors have pointed out that it is because US direct investments abroad have been generating better returns than have foreign direct investments in the United States. However, there is no consensus on why this is the case. This paper investigates this issue by conducting panel regressions to identify the main determinants of return on US direct investment abroad (RUSDIA) and those of return on foreign direct investment in the United States (RFDIUS), using data from 49 countries over the 1994–2013 period. Our findings suggest that the largest contributor to the RUSDIA‐RFDIUS gap is USDIA's advantage in the internalisation effect, which more than offset any negative age effect. The second largest contributor is income‐shifting activities by US‐controlled MNCs aiming to lower their overall tax payments. The third contributor is the negative age effect of inward FDI in the United States, which more than offset its weak internalisation effect. Altogether, those effects account for about 50% of the average return gap from 1994 to 2013. The contribution of the risk‐compensation hypothesis to the return gap is negligible.     

Sex,education, and unionism: demographic determinants of attitude toward japanese direct investment

This article reports the findings of a major survey of Ohio residents’ attitudes toward Japanese foreign direct investment in the United States. Attitudinal data were collected from 448 respondents with respect to their perceptions of Japanese investment in the United States and its effects. Crosstabulation of the data reveal the existence of significant attitudinal differences. Specifically, sex, educational level, and union membership are found to be significantly related to attitudes regarding Japanese foreign direct investment Women, individuals with lower levels of education, and union members hold more negative attitudes toward several aspects of Japanese foreign direct investment than the state's population as a whole.     

FOREIGN EXCHANGE RATES AND FOREIGN DIRECT INVESTMENT IN THE UNITED STATES

The hypothesis that foreign direct investment into the United States responds to variations in exchange-rate levels and to exchange-rate uncertainty is tested for the period 1976-1998. We account for nonstationarity and cointegration in the data series and use conditional measures of exchange-rate uncertainty. While a long-run relationship exists among foreign direct investment in-flows as a share of GNP, the real exchange rate, and the GARCH measure of exchange-rate volatility, we find no discernible link between the real exchange rate and inward foreign direct investment in the short run. We also conclude that foreign direct investment decreases in response to increases in exchange-rate uncertainty in the short run when we use a conditional measure of exchange-rate uncertainty.     

Performance feedback on sales growth goal and OFDI location choices for firms in emerging economies

This study explores the influence of performance feedback relative to sales growth on emerging economy firms’ (EEFs) outward foreign direct investment (OFDI) in developed and developing economies. It takes a global value chain perspective to examine whether performance feedback motivates EEFs’ location choice for OFDI. Using listed Chinese firms’ data, we find negative performance feedback relative to sales growth motivates EEFs to increase OFDI in developing economies but reduce it in developed economies. However, positive feedback relative to sales growth reduces it in both developed and developing economies. We contribute to OFDI location choice literature by including a behavioral perspective.     

Sourcing patterns of export‐platform foreign affiliates: The case of Japanese affiliates in Mexico

This study investigates the sourcing patterns of Japanese export‐platform foreign affiliates in Mexico, which mainly export to the United States and Canada. We propose a novel approach to estimate intermediate input elasticities of exports by sourcing country. We find that, on average, Japanese export‐platform foreign affiliates in Mexico source intermediate inputs from third countries, including the United States and Canada, rather than from Japan and Mexico, suggesting that Japanese export‐platform foreign affiliates in Mexico are mainly integrated into the vertical production networks back and forth between Mexico, the United States and Canada. In turn, Japanese foreign affiliates selling domestically in Mexico source intermediate inputs not only within the North American Free Trade Agreement countries but also from Japan. In addition, we find that export‐platform foreign affiliates in Mexico use more labour‐intensive production than do foreign affiliates selling domestically in Mexico. This suggests that saving labour costs is one of the motives for export‐platform foreign direct investment in Mexico.     

Injecting demand through spillovers: Foreign direct investment,domestic socio-political conditions,and host-country entrepreneurial activity

This study examines how foreign direct investment (FDI) spurs entrepreneurial activity in host countries. We also investigate why this relationship varies across countries because of domestic socio-political conditions. The findings from our panel analyses of 104 countries from 2000 to 2009 are consistent with our predictions that foreign direct investment positively relates to business creation and this positive effect is strongest in countries with poor institutional support, weak political stability, and low general human capital. Our work provides new insights into how cross-border investments and domestic socio-political conditions jointly influence entrepreneurial activity, especially in emerging and developing economies.     

The impact of FDI on the performance and entrepreneurship of domestic firms

This paper examines how foreign direct investments influence the performance and entrepreneurship of domestic firms, a crucial question for economies driven by incursion of exogenous factors and especially transition economies. The intent is to investigate the way foreign direct investments shape the capabilities of domestic firms; hence, for this purpose, we take Macedonia, a Southeast European economy, as a case study. We find that (i) foreign ownership has helped restructure and enhance the productivity of domestic firms, (ii) FDI has positive influence in reinforcing the creation of new firms, and (iii) in line with the established literature, a foreign investment is likely to influence the job seeker to get employed rather to start their own business. Overall, the results confirm the influence of foreign firms in assisting entrepreneurial activity. The impact of foreign investment is, in general, positive and tends to influence the restructuring process of domestic enterprises.     

Wages and foreign ownership A comparative study of Mexico, Venezuela, and the United States

This paper explores the relationship between wages and foreign investment in Mexico, Venezuela, and the United States. Despite very different economic conditions and levels of development, we find one fact that is robust across all three countries: higher levels of foreign investment are associated with higher wages. However, in Mexico and Venezuela, foreign investment is associated with higher wages only for foreign-owned firms — there is no evidence of wage spillovers leading to higher wages for domestic firms. The lack of spillovers in Mexico and Venezuela is consistent with significant wage differentials between foreign and domestic enterprises. In the United States, where the evidence suggests some wage spillovers from foreign to domestic enterprises, wage differentials are smaller.     

国际直接投资的贸易效应分析--对小岛清模型的扩展

小岛清模型认为国际直接投资的贸易效应是互补效应，其实质就是贸易创造效应。本文认为国际直接投资同时具有贸易创造效应和贸易替代效应。因而国际直接投资的贸易净效应，要依据不同产业而定。在小岛清模型的理论基础上，本文构建了三个模型来分析国际直接投资的贸易效应。     

World market integration through the lens of foreign direct investors

This paper is motivated by the unparalleled increase in foreign direct investment to emerging market economies of the last 25 years. Using a large cross-country time-series data set, we evaluate the dependence of foreign direct investment on global factors, or worldwide sources of risk (i.e., factors that drive foreign direct investment across several countries). We construct a globalization measure that equals the share of explained variation in direct investment attributable to global factors. We show that our globalization measure has increased steadily for developing and developed countries. For the full sample of countries, the globalization measure rose by over 10-fold from 1985 to 1999. Furthermore, in recent years, developing countries' exposure to global factors has approached that of developed countries. Finally, our globalization measure correlates strongly with measures of capital market liberalization, supporting our hypothesis that increased market integration leads to a greater role for worldwide sources of risk. We discuss the implications of our results for public policies regarding capital market liberalization and policies directed at attracting foreign investment.