The ownership advantage in Latin American FDI: A sectoral study of us direct investment in Mexico

Abstract

This article develops a model which tests the hypothesis that sectoral FDI flows from the United States to Mexico over a four‐year period can be explained by the ownership advantages of US multinationals. Theoretical developments in the concept of ‘ownership advantage’ are used to guide the formulation of the research. The findings suggest that direct investment into US MNEs’ affiliates in Mexico is driven by benefits derived from embedded human knowledge, technology‐embodied advantages, and possibly from scale advantages. Local R&D is negatively associated with FDI.