Level of Economic Development and Performance of United States Direct Investments Abroad

Abstract

In recent years, several case studies have been conducted on the operations of individual foreign subsidiaries of United States firms.1 While these are useful, they do not provide a means of comparing the operating characteristics of direct foreign investments as they may relate to the level of development of the countries in which they reside. There also have been some excellent comparative studies.2 These have concentrated upon comparisons of United States controlled enterprises abroad with those controlled either by other expatriate groups or by nationals. Perhaps the only intercountry comparison of the operating characteristics of United States direct foreign investments was that by Anthony Y. C. Koo.3 Koo's analysis utilized data from an Office of Business Economics survey of United States investments in Latin America. Thus it was confined to a group of countries which were all relatively less-developed (as of 1955). Because that survey did not provide country data on an industry sector basis, Koo was unable to examine for country differences within industry sectors. The purpose of this article is to partially close this gap. Our objective is to explore the question: Are the performance characteristics of direct foreign investments within industry sectors significantly influenced by the level of development of the country or region which harbor those investments? To examine this question comprehensively, it would be useful to have time series data on a large cross section of countries and several industry sectors. Data should be designed to reflect the economic contribution of investments in various sectors. We could then evaluate the extent to which there may be inherent difficulties faced by lessdeveloped countries difficulties which restrain them from fully realizing the potential contributions of direct foreign investment. To evaluate and compare the economic contribution of various sectors to the host country, it would be useful to know the effects of investments upon: