The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs) |
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| Affiliation: | 1. Department of Management, Quinlan School of Business, Loyola University Chicago, 16 E. Pearson St., Chicago, IL 60611, United States;2. School of Finance and Management, SOAS University of London, UK;3. Department of Management, The Chinese University of Hong Kong, Shatin, N.T., Hong Kong;1. School of Marketing and Communication, University of Vaasa, Finland;2. School of Business and Economics, Linnaeus University, Sweden;1. Universita Cattolica del Sacro Cuore, Largo A. Gemelli, 1, 20123, Milano, Italy;2. University of Liverpool Management School, Chatham Street, Liverpool, L69 7ZH, UK;3. Leeds University Business School, University of Leeds, Leeds, LS2 9JT, UK;1. Williams Centre for Learning Advancement, Faculty of Business & Economics, The University of Melbourne, 111 Barry St, Carlton, VIC, 3053, Australia;2. Department of Business Administration, Faculty of Business Economics & Melbourne Business School, The University of Melbourne, Office 20, 200 Leicester Street, Carlton, ViIC, 3053, Australia;1. Department of Management, Room 828, 8/F, Cheng Yu Tung Building, The Chinese University of Hong Kong, 12 Chak Cheung Street, Shatin, Hong Kong;2. Department of Marketing, Nanyang Business School, Nanyang Technological University, 50 Nanyang Drive, Singapore 639798, Singapore;3. W. A. Franke College of Business, Northern Arizona University, 101 E. McConnell Drive, Flagstaff, AZ 86011-5066, United States;4. Department of Business Administration, Room 926, College of Economics and Management, Nanjing University of Aeronautics and Astronautics, 29 Jiangjun Road, Jiangning District, Jiangsu Province, China;1. EM Strasbourg Business School, Université de Strasbourg, HuManiS (UR 7308), Strasbourg, France;2. IAE Aix-Marseille Graduate School of Management, CERGAM, Aix-Marseille Université, Aix-en-Provence, France;3. SKEMA Business School, Sophia Antipolis, France;4. Fundação Getulio Vargas – Brazilian School of Public and Business Administration (FGV-EBAPE), Rio de Janeiro, Brazil;1. Department of Business & Management, Aalborg University, Fibigerstrœde 11, 9220 Aalborg East, Denmark;2. Department of Business & Management, Aalborg University, Fibigerstrœde 11, 9220 Aalborg East, Denmark;3. School of Marketing and Communication, University of Vaasa, P.O. Box 700, FI-65101 Vaasa, Finland |
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| Abstract: | Using a sample of 787 Japanese MNEs operating in 60 countries from 1996 to 2010, this study examines the impacts of MNEs’ three most commonly observed forms of non-conventional outbound FDI (i.e., as a means to counter trade barriers, to achieve a financial hedge, or to obtain tax breaks) on domestic employment levels of MNEs at home. We build on a conceptual classification of ‘motivation-activity’ of MNEs as a theoretical framework, and evaluate the impacts of MNEs’ non-conventional outbound FDI on their domestic employment levels in relation to the MNEs’ specific combination of ‘motivation’ and ‘activity’ as they conduct outbound FDI in host countries. The 3SLS regression results show strong evidence that non-conventional outbound FDI in core business activities reduces MNEs’ domestic employment levels when the investment is primarily for responding to country-specific conditions, such as circumventing host country restrictions (e.g., FDI to counter trade barriers) or escaping from home country restrictions (e.g., FDI for tax incentive packages), while FDI in non-core business activities (e.g., FDI for financial hedging or FDI in tax havens) has either a positive or insignificant effect on MNEs’ domestic employment levels depending on whether it aims to develop FSAs or not. We conclude the study with public policy implications from these findings. |
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| Keywords: | Non-conventional outbound FDI Trade barriers Financial hedge Tax breaks Domestic employment Japanese MNEs |
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