Composition Of Foreign Direct Investment Research Articles

Size, Location and Agglomeration of Inward Foreign Direct Investment (FDI) in the United States

Halvorsen T. Size, location and agglomeration of inward foreign direct investment (FDI) in the United States, Regional Studies. Since the late 1970s a range of economic development policies to attract foreign direct investments (FDIs) have been tried out. Despite a policy reorientation from a large-size bias to policies also favouring smaller investments, little empirical work has been performed on the determinants of investment size. This paper presents empirical evidence on how the size of FDIs is determined by agglomeration and other state-level factors. The results indicate that FDI agglomeration and urbanization affect investment size and that taxes, markets, labour, land and the concentration of scientific knowledge are important determinants in the size composition of FDI. Halvorsen T. Le montant, la localisation et l'agglomération de l'investissement direct étranger (IDE) aux Etats-Unis, Regional Studies. Depuis la fin des années 1970, on met en vigueur toute une série de politiques de développement économique afin de séduire l'investissement direct étranger. En dépit d'une réorientation de la politique d'une tendance à la taille vers des politiques plutôt en faveur des investissements plus modestes, rares sont les recherches empiriques sur les déterminants du montant de l'investissement. Cet article cherche à présenter des preuves empiriques sur la détermination du montant de l'IDE en fonction de l'agglomération et d'autres facteurs au niveau de l'Etat. Les résultats laissent voir que l'agglomération et l'urbanisation de l'IDE influencent le montant de l'investissement, et que les impôts, les marchés, la main-d'oeuvre, le terrain, et la concentration de la connaissance scientifique sont d'importants déterminants de la structure du montant de l'IDE. Investissement direct étranger (IDE) Economies d'agglomération Montant de l'investissement Etats-Unis Halvorsen T. Umfang, Standort und Agglomeration von ausländischen Direktinvestitionen in den USA, Regional Studies. Seit dem Ende der siebziger Jahre des 20. Jahrhunderts wurden verschiedene Wirtschaftsentwicklungspolitiken zur Anziehung von ausländischen Direktinvestitionen ausprobiert. Trotz einer politischen Umorientierung von einer Bevorzugung umfangreicher Investitionen hin zu einer Begünstigung auch von kleineren Investitionen wurden über die Determinanten für den Umfang der Investition bisher nur wenige empirische Studien durchgeführt. In diesem Beitrag werden empirische Belege zur Frage vorgestellt, wie die Höhe von ausländischen Direktinvestitionen von der Agglomeration und von anderen Faktoren auf Staatsebene bestimmt wird. Aus den Ergebnissen geht hervor, dass sich die Agglomeration und Urbanisierung von ausländischen Direktinvestitionen auf die Investitionshöhe auswirken und dass Steuern, Märkte, das Angebot an Arbeitskräften und Grundstücken sowie die Konzentration von wissenschaftlichem Wissen wichtige Determinanten für die Höhe und Zusammensetzung ausländischer Direktinvestitionen darstellen. Ausländische Direktinvestitionen Agglomerationswirtschaften Investitionshöhe USA Halvorsen T. Tamaño, ubicación y aglomeración de la inversión extranjera directa interna (IDE) en los Estados Unidos, Regional Studies. Desde finales de los setenta se han puesto en marcha una serie de políticas de desarrollo económico para atraer la inversión directa extranjera (IDE). Pese a una reorientación política desde una predisposición de inversiones importantes hacia políticas que también favorecen inversiones más pequeñas, se ha realizado poco trabajo empírico sobre los determinantes del tamaño de las inversiones. En este artículo presentamos evidencia empírica que demuestra que el tamaño de la IDE está determinado por la aglomeración y otros factores a nivel estatal. Los resultados indican que la aglomeración y la urbanización de la IDE afectan al tamaño de la inversión y que los impuestos, los mercados, la mano de obra, el suelo y la concentración de conocimiento científico son determinantes importantes en la composición del tamaño de la IDE. Inversión directa extranjera (IDE) Economías de aglomeración Tamaño de la inversion Estados Unidos

Sectoral Composition of Foreign Direct Investment and External Vulnerability in Eastern Europe

In the run up to the global crisis, countries in Central Eastern and Southeastern Europe attracted large capital inflows and some of them built up large external imbalances. This paper investigates whether these imbalances are linked to the sectoral composition of FDI. It shows that FDI in the tradable sectors leads to an improvement of the external balance. We also find that the countries with large market size, good infrastructure, greater trade integration, and educated labor force are more likely to receive more FDI in the tradable sectors.

External asymmetries in the Euro-area and the role of Foreign Direct Investment

A few years after the establishment of the European Economic and Monetary Union (EMU), large asymmetries emerged in the trade balances and the current accounts of the member-states. A divide seems to separate two groups in the euro area, one with the northern countries achieving external surpluses and the other including the southern countries with large external deficits. We argue that a crucial factor in shaping productivity, and consequently affecting competitiveness and the external position of the economy, is the size and composition of Foreign Direct Investment (FDI) and find that the northern countries received more total FDI than the southern group. Moreover, the southern countries attracted more investment in real estate rather than the productive sector. Focusing on ten euro area economies over the period 1980-2009, we establish a positive relationship between FDI flows and trade balances in the northern countries, in contrast to a negative one for the southern group. Using industry-level data, we also establish a positive (negative) long-run relationship between FDI in the manufacturing (non-manufacturing) sector and the trade balance for the northern (southern) countries.

Sectoral Composition of Foreign Direct Investment and External Vulnerability in Eastern Europe

In the run up to the global crisis, countries in Central Eastern and Southeastern Europe attracted large capital inflows and some of them built up large external imbalances. This paper investigates whether these imbalances are linked to the sectoral composition of FDI. It shows that FDI in the tradable sectors leads to an improvement of the external balance. We also find that the countries with large market size, good infrastructure, greater trade integration, and educated labor force are more likely to receive more FDI in the tradable sectors.

Russia's Inward and Outward Foreign Direct Investment: Insights into the Economy

A prominent British economist reviews the recent growth, partner-country composition, and sector composition of foreign direct investment in and out of Russia from a comparative international perspective, based on UNCTAD and Central Bank of Russia data as well as selected case studies. Two hypotheses are tested: that foreign policy significantly affects the host-country pattern of Russia's outward foreign direct investment (OFDI) and that domestic institutions significantly impact the host-country pattern of Russia's OFDI and the sectoral pattern of its inward foreign direct investment (IFDI). Quantitative evidence of foreign-policy influence could not be found, while domestic institutional influences do appear to be present, most notably in the form of system-escaping OFDI.

An Assignment Theory of Foreign Direct Investment

We develop an assignment theory to analyse the volume and composition of foreign direct investment (FDI). Firms conduct FDI by either engaging in greenfield investment or in cross-border acquisitions. Cross-border acquisitions involve firms trading heterogeneous corporate assets to exploit complementarities, while greenfield FDI involves setting up a new production division in the foreign country. In equilibrium, greenfield FDI and cross-border acquisitions coexist within the same industry, but the composition of FDI between these modes varies with firm and country characteristics. Firms engaging in greenfield investment are systematically more efficient than those engaging in cross-border acquisitions. Furthermore, most FDI takes the form of cross-border acquisitions when production-cost differences between countries are small, while greenfield investment plays a more important role for FDI from high-cost into low-cost countries. These results capture important features of the data.

An Assignment Theory of Foreign Direct Investment

We develop an assignment theory to analyze the volume and composition of foreign direct investment (FDI). Firms conduct FDI by either engaging in greenfield investment or in cross-border acquisitions. Cross-border acquisitions involve firms trading heterogeneous corporate assets to exploit complementarities, while greenfield FDI involves building a new plant in the foreign market. In equilibrium, greenfield FDI and cross-border acquisitions co-exist, but the composition of FDI between these modes varies with firm and country characteristics. Firms engaging in greenfield investment are systematically more efficient than those engaging in cross-border acquisitions. Furthermore, most FDI takes the form of cross-border acquisitions when factor price differences between countries are small, while greenfield investment plays a more important role for FDI from high-wage into low-wage countries. These results capture important features of the data.

The composition of foreign direct investment and protection of intellectual property rights: Evidence from transition economies

While existing literature examined the impact of intellectual property protection on the volume of foreign direct investment (FDI), little is known about its effect on the composition of FDI inflows. This paper addresses this question empirically using a unique firm-level data set from Eastern Europe and the former Soviet Union. It finds that weak protection deters foreign investors in technology-intensive sectors that rely heavily on intellectual property rights. Moreover, the results indicate that a weak intellectual property regime encourages investors to undertake projects focusing on distribution rather than local production.

The comparative attractiveness of international business locations: the role of labor law

At a time of intensifying uncertainty, managerial flexibility to adapt to changes in the economic environment is increasingly important. Different business locations, it is frequently argued, offer this flexibility to differing degrees, labor law being one essential factor in determining the resulting attractiveness of a country as a business location. This paper takes an options perspective in order to grasp the potential effect of labor law on location decisions. The option value of an investment, it is argued, is influenced, among other factors, by labor law provisions. Depending on their preference for a certain set of options, different investors will prefer different labor market settings. The ability of the options perspective to assess the role of labor law for the attractiveness of international business locations is exemplified in a British‐German comparison and confronted with data on the composition of foreign direct investment in the two countries.

Corruption and Composition of Foreign Direct Investment: Firm-Level Evidence

The authors study the impact of corruption in a host country on foreign investors'preference for a joint venture, or a wholly owned subsidiary. Their simple model highlights a basic tradeoff in using local partners. On the one hand, corruption makes the local bureaucracy less transparent, and increases the value of using a local partner to cut through the bureaucratic maze. On the other hand, corruption decreases the effective protection of an investors'intangible assets, and reduces the probability that disputes between foreign and domestic partners, will be adjudicated fairly, which reduces the value of having a local partner. As the investor's technological sophistication increases, so does the importance of protecting intangible assets, which tilts the preference away from joint ventures in a corrupt country. Empirical tests of this hypothesis on firm-level data show that corruption reduces inward foreign direct investment, and shifts the ownership structure toward joint ventures. Conditional on foreign direct investment taking place, an increase in corruption from the level found in Hungary to that found in Azerbaijan, decreases the probability of a wholly owned subsidiary by 10 to 20 percent. Technologically more advanced firms are less likely to engage in joint ventures, however. The authors find support for the view that U.S. firms are more averse to joint ventures in corrupt countries than other foreign investors - possibly because the U.S. Foreign corrupt Practices Act, which stipulates penalties for executives of U.S. companies whose employees, or local partners engage in paying bribes. But although U.S. companies are more likely than investors from other countries to retain full ownership of firms in corrupt countries, they are not less likely than firms from other countries to undertake foreign direct investment in thosecountries.

Composition of Foreign Direct Investment and Protection of Intellectual Property Rights in Transition Economies

Using a unique firm-level dataset this study shows that foreign investors in transition economies are characterized by low, rather than high, R&D intensity. It also finds that investors with higher R&D spending are more likely to engage in non-manufacturing projects than in local production. The empirical analysis links these results to weak protection of intellectual property rights (IPRs). It shows that weak protection deters foreign investment, especially investment in those technology-intensive sectors that rely heavily on IPRs. Weak IPR protection also encourages investors to undertake non-manufacturing projects rather than local production. The study concludes that IPR protection affects the composition of FDI inflows.

Foreign Direct Investment in China: An Examination of the Literature

Since 1978, when China announced its ‘open-door’ policy to pursue the country's long-term national goal, the Four Modernisations, more than 220,000 foreign funded ventures have been approved. By the end of 1994 some US$300 billion of contracted investment had been agreed and US$95 billion of utilized investment, making the country the most important recipient of foreign direct investment (FDI) in the developing world. This paper analyses the phenomenon of FDI in China. It examines the different forms and composition of FDI, reviewing its development since the early days of the ‘open-door’ policy and analysing its importance for Chinese domestic and export industries, as well as Western investor companies. Furthermore, the paper focuses on the world-wide sources of FDI in China and its distribution by both region and industry. Additionally, it reviews the existing research on FDI in China, emphasizing the investment mode of equity joint venture.

The role of foreign direct investment in China's post-1978 economic development

The evolution of China's policy toward foreign direct investment (FDI) during the post-1978 period is reviewed and the volume, sources, geographic distribution and composition of FDI are analyzed. It is found that FDI has been positively associated with economic growth, and the increase of total fixed asset investment in China. Foreign direct investment has also forced an increasing number of domestic manufacturers to compete globally. It has also been associated with phenomena such as: (a) the accelerating uneven development between the coastal and inland provinces, (b) worsening income distribution, and (c) declining ideological commitment. While the opening of the Chinese economy to FDI is still an ongoing process, positive stimulating effects of foreign direct investment in China are observed, and these are found to contribute toward the success of its recent economic reforms.