Foreign Direct Investment In Services Research Articles

Location choice of foreign direct investment in technical KIBS in China: impact of human capital and intellectual property rights protection

PurposeThis study considers the “technology creation” characteristic of technical knowledge-intensive business services (T-KIBS) and examines how human capital and intellectual property rights (IPR) protection affect the location choice of foreign direct investment (FDI) in China for two types of T-KIBS: (1) information transmission, software and information technology (ICT) services and (2) scientific research and technology (SCI) services.Design/methodology/approachOur empirical analysis is based on panel data on 22 Chinese provinces from 2009 to 2017. We use the generalized method of moments estimation for the regression analysis.FindingsFDI in ICT services prefers regions with high human capital, while FDI in SCI services favors regions with good IPR protection.Research limitations/implicationsFuture research could use more comprehensive data and qualitative interviews to enhance the findings.Practical implicationsThese findings provide a foundation for China’s future policy on attracting FDI into T-KIBS, especially in areas related to human capital and IPR protection.Originality/valueThis study bridges the research gap on the FDI location choice of T-KIBS in China by clarifying the influences of human capital and IPR protection and providing theoretical support for the location choice of T-KIBS FDI.

Effects of foreign direct investment in services on input imports of manufacturing firms: Evidence from China

AbstractThis study investigates the causal effects of foreign direct investment (FDI) in services on the input imports of manufacturing firms. We exploit a plausibly exogenous policy of FDI liberalization in services in China to construct an instrumental variable for FDI in services and address endogeneity concerns. The results demonstrate that FDI in services positively impacts both the value and sophistication of input imports for manufacturing firms. Mechanism analysis reveals that FDI in services enhances firms' input imports through reductions in production costs, relief from financial constraints, and decreased remote coordination costs. The positive effects of FDI in services are particularly pronounced for firms with lower initial productivity and higher levels of human capital.

Productivity and foreign direct investment in the services sector: an econometric analysis

Purpose: Our study seeks to measure the impact of Foreign Direct Investments (FDI) in the services sector on the productivity of municipalities in the state of São Paulo. Theoretical framework: FDI in the services sector has become increasingly important for emerging economies due to the spillover effects, which can boost regional economic development. Methodology/Approach: This study uses econometric modeling to measure the impact of services FDI at the municipal level in the state of São Paulo, the most FDI-intensive region in Brazil. To do so, this study employs an unbalanced panel of data that includes all FDI-receiving municipalities in the state between 2010 and 2016. Findings: Our results point to a positive relationship between FDI in services sectors and municipal productivity. Research, practical & social implications: This study outcomes offer valuable perspectives for the formulation of public policies aimed at attracting foreign investments. They also have important implications for the service sector and could be a reference for future studies on the subject. Originality/ Value: This study addresses FDI in emerging countries, an important discussion given the impact of this type of investment on economic development and social indicators. In addition, this paper expands the FDI literature beyond the manufacturing sector. Keywords: Foreign Direct Investment; Foreign Direct Investment in Services; Spillovers; Productivity.

Research on Employment Effect of FDI in Service Industry in Jiangsu Province

In recent years, the global foreign direct investment (FDI) has shown a “service-oriented” trend, and the labor force has gradually begun to flow to the service industry. Introducing FDI into service industry can not only absorb part of employment with its job-creation effect, but also promote the improvement of employment quality. Under the guidance of market demand and the government, the proportion of FDI in China's service sector has gradually increased, and the service sector and service trade have become a new driving force for China's economic growth. The development of service industry in Jiangsu province has always been in a leading position in China. Meanwhile, Jiangsu province is also one of the main provinces where labor force gathers. Therefore, it is of theoretical and practical significance to study the employment effect of FDI in service industry in Jiangsu Province for relieving employment pressure and promoting the efficient use of FDI. This study firstly combs the relevant literature at home and abroad, which is divided into two aspects of employment quantity and employment quality. On this basis, the paper analyzes the mechanism of service FDI's influence on employment from these two levels and constructs the theoretical basis of this study. Secondly, this study analyzes the current situation of FDI and employment in service industry in Jiangsu Province. Then, empirical analysis is made on the data of Jiangsu province from 2007 to 2020, and the conclusion is drawn that FDI in service industry in Jiangsu Province can not only promote the increase of employment quantity in service industry, but also promote the improvement of employment quality in service industry. Based on the above analysis, this study puts forward relevant suggestions on how to make more efficient use of FDI to drive employment effect in Jiangsu province.

Agricultural Sector FDI as a Driver of Tourism Sector FDI for a Sustainable Economy

This study aims to see whether FDI (Foreign Direct Investment) from the Agricultural Sector can be able to encourage FDI from the Tourism sector in Sumatra Island in the short and long term are supporting the Sustainable Economy in the future. The first analytical method used in this research is the descriptive method and the second method is the panel data regression method with the Vector Error Correction Model (VECM) in 8 regions on the island of Sumatera-Indonesia for 20 years. FDI from the Agricultural Sector is expected to be able to encourage the growth or increase of FDI in the Tourism sector; because several developed countries have changed or developed other service sectors to lead a Sustainable Economy. And the results of this study prove that in the long term and short term FDI in the agricultural sector and FDI in the Tourism services sector influence Gross Domestic Product Regional (GDPR).

Documenting major drivers of trends in trade balance for SADC region amid the full implementation of the African Continental Free Trade Area (AFCFTA)

This study scrutinises drivers of trade performance in the SADC region amid the full implementation of the African Continental Free Trade Area (AfCFTA). Where the short and long-run impact, through the Autoregressive Distributive Lag (ARDL) and forecasts through IRF of external debt, debt service cost, GDP per capita, Foreign Direct Investment (FDI), and Terms of Trade (TOT) on the trade balance is interrogated. In the long run, external debt, debt service costs, and GDP per capita negatively influenced the trade balance. TOT was found to be an insignificant predictor. This implies that these variables were among the significant drivers of trade balance while the impact of terms of trade is negligible in the region. FDI positively impacts regional trade balance, which informs us that it acts as a stimulus for trade in the area. Short-run results revealed that external debt and GDP per capita affected trade balance positively, while debt service costs, FDI and TOT were found to have a negative impact. IRF results showed that shocks from external debt and per capita GDP pose a positive instant impact, while shocks from FDI and TOT were proven to worsen the trade balance in the region. The region needs an FDI stimulus.

The Growth of Service Sectors, Institutional Environment and Quality Development in China’s Manufacturing

The path of exploring the high-quality development of the manufacturing industry has become one of the focus issues in China. In terms of experience, the impact of service sector growth on the quality of China’s manufacturing industry is unclear. Therefore, institutional environment is incorporated in the research frame, and the Sys-GMM is used to estimate the relationship between them based on China’s provincial panel data from 2010 to 2020. The main results showed that: (1) Both the service sector growth and institutional environment can improve the quality of manufacturing development, and they have a significant interaction. (2) The impact of service sector growth on the quality of manufacturing industry decreases in the eastern, central and western regions of China. The expansion of foreign direct investment in services cannot significantly improve the quality development in China’s manufacturing, and there is no obvious interaction between SFDI and the institutional environment. However, the domestically funded service sector is the opposite. The main contribution of this paper is to empirically verify the impact of service sector growth on the quality of manufacturing development in China, and consider the differences in the impact of regional development of service sectors and the heterogeneity of investment subjects. In addition, from the perspective of system development, this article considers the influence of the institutional environment, so as to analyze the former’s impact on the latter in more detail.

The effect of service FDI on carbon productivity in China: a multidimensional heterogeneity perspective

ABSTRACT Effect of foreign direct investment (FDI) in services on carbon productivity is examined based on Chinese province-level panel data from 2007 to 2019. We control for income level, technical level and sectoral differences and find (ⅰ) in the full sample, service FDI has no significant effect on carbon productivity; (ⅱ) the effect of income inequality: service FDI flowing into high-income regions benefits the environment, while flows to low-income regions do not support the pollution-halo effect; (ⅲ) the effect of technology inequality: service FDI in regions with high technology levels reduces the carbon emission, while the environmental effect of service FDI is insignificant in low-technology regions; (ⅳ) industrial heterogeneity: FDI inflows to different sectors show different sensitivities to income level and have different impacts on carbon productivity. The result has a strong policy implication which will be helpful for the local governments to make policies with the aim to maximize the benefit from the pollution-halo effect of service FDI.

Liberalization for services foreign direct investment and product mix adjustment: Evidence from Chinese exporting firms

AbstractThis article is the first to explore how manufacturing firms adjust their export product mix in response to services liberalization. We focus on the liberalization of services foreign direct investment (FDI) in destination (importing) countries. Our analysis of detailed customs transaction data from China, finds a promotion effect of services FDI liberalization on export diversification of manufactured goods, which is mainly revealed by an increase in export value, variation in the number of product varieties, the dispersion ratio across exported products, and a decrease in the export skewness ratio. However, this diversification‐promotion effect is only found in developing countries, but not present in developed countries. Our study suggests that services liberalization incurred in importing countries play an important role in promoting export scale and diversification.

Foreign direct investment in services and manufacturing export sophistication in China

ABSTRACT This study investigates the impacts of FDI in services on the sophistication of the total export and the domestic added components of manufacturing firms in China, utilizing the policy of FDI access relaxation in services as an exogenous shock. The results show that FDI in services increases the sophistication of firms’ total export, but decreases the sophistication of domestic added components. Increasing the use of imported sophisticated inputs is a potential influencing mechanism of FDI in services.

FDI: Hot or Cold Money? The Behaviour of Sectoral FDI Inflows and Outflows Over Periods of Growth Accelerations and Decelerations

The economic crisis caused by the COVID-19 pandemic invokes questions about a possible prolonged economic deceleration. In this article, we study the impact of output growth accelerations and decelerations, as per the definition of Arbache and Page (2007, More growth or fewer collapses? A new look at long run growth in Sub-Saharan Africa [Working Paper 4384]) and Conceicao and Kim (2010, The asymmetric impact of growth fluctuation on human development: Evidence from correlates of growth decelerations and accelerations. Mimeo), on sector-level foreign direct investment (FDI) inflows and outflows for a group of 34 OECD countries in the period 1995–2019. The results show that Finance services FDI and transport services FDI inflows are countercyclical, while manufacturing FDI outflows are procyclical. Transport services FDI outflows are countercyclical, and the most significant determinant of both FDI inflows and outflows is the control of corruption, respectively, in the host and home countries. JEL Codes: F21, O16, O19

Under which conditions do manufacturing companies choose FDI for service provision in foreign markets? An investigation using fsQCA

Studying the provision of services from the point of view of manufacturing firms has been highlighted by many researchers in different fields. Besides, research on international business on the internationalization of either goods or services is vast, but rare on the combination thereof. While some studies have shown that firm-, country- and offering-specific factors can influence the foreign operation mode (FOM) of goods-related services, only a few have examined how these factors interrelate. The purpose of this study is to detect different configurations of conditions leading to a same decision. To answer this, the present study draws on the configurational approach and examines how combinations of different conditions lead to the choice of foreign direct investment (FDI) for service provision.A state-of-the-art fuzzy set qualitative comparative analysis (fsQCA) is applied to a sample of 111 Swiss and German industrial goods manufacturers. Choosing FDI for the provision of goods in foreign markets constitutes a necessary condition for service FDI. From the sufficiency analysis, several causal paths are detected. Companies with a servitization strategy choose FDI for their service resources only in digitally ready countries. The results furthermore show that differences between base, intermediate and advanced services exist. Also, the digital readiness of the country is found to be an important influence factor on the FDI decision.

Producer service foreign direct investment and pollution in China

AbstractThe impacts of services, especially the producer services, on pollution have received little attention so far. In this paper, we propose the hypotheses that producer service foreign direct investment (PS FDI) would have direct impact on pollution, in a way that is similar to manufacturing activities. We test our hypotheses using Chinese provincial data from 2008 to 2018. Our findings show that PS FDI does affect pollution in a significant way, and the results remain robust under various tests. We also identify significant mediating effect, whereby PS FDI not only directly affects pollution levels, but also indirectly does so via its impacts on manufacturing activities. Besides localised effect, we show that PS FDI exhibits spatial spillover effect by influencing pollution levels in neighbouring provinces. Finally, we find that manufacturing activities magnify the impact of PS FDI on pollution locally, but mitigate its spatial spillover effect.

Re‐examining the impact of sectoral‐ and industrial‐level FDI on growth: Does institutional quality, education levels and trade openness matter?

AbstractThis study examines whether institutional quality, education levels and trade openness affect the relationship between sectoral‐ and industrial‐level foreign direct investment (FDI) inflows and economic growth. Previous studies highlight the heterogeneous effects of FDI at the sectoral‐ and industrial‐level suggesting the need to examine the growth effects of FDI at a disaggregated level. However, previous studies have not empirically explored the role of absorptive capacities at the industrial‐ and sectoral‐level. Consequently, using a sample of 36 Organisation for Economic Co‐operation and Development countries from 2000 to 2019, we examine the relationship using the system generalised method of moments estimator to control for endogeneity. Our results show that the magnitudinal effects of overall FDI is dampened as sectoral‐ and industrial‐effects are not considered. We find that both manufacturing and services FDI contributes to growth. However, the effect of manufacturing FDI is greater. Meanwhile, we find education levels to be an effective moderator for services FDI, while trade openness enhances the growth effects of manufacturing FDI more effectively. Institutional quality is shown to have a positive complementary effect across both sectors and certain industries. Policy implications are discussed.

Who Gains from Services FDI—Host or Home Economies? An Analysis of Disaggregated Services FDI Inflows and Outflows of 24 European Economies

This study focuses on a sample of 24 European economies to examine the spillovers from disaggregated services foreign direct investment (FDI) on economic growth. We study the impact of 20 disaggregated services FDI inflows and outflows, respectively, on their host and home country services sector and overall growth. We find that both financial services and business services FDI are beneficial for growth in both host and home countries. Financial services FDI works though financial holding companies and home countries benefit especially from investment in foreign banks, which provides access to credit. Business services FDI works though management holding companies and home countries benefit, especially from investment in computer activities, which provides access to specialised human capital and high-value knowledge assets. The positive spillovers to home countries provide evidence for arguing against protectionism. JEL Codes: F2, F21, F43

Insurance and foreign direct investment: a review (or lack) of evidence

Foreign participation in insurance markets is related to various streams of literature, including foreign direct investment (FDI) and international trade in insurance services. Only a few papers have examined the potential role of FDI in insurance services. Similar to the banking literature, some papers have explained the factors contributing to foreign entry in a single country or the determinants of FDI-preferred locations. Other papers have examined the impact of foreign entry on the host country sector or the relationship with insurance development and insurance market activities. Our purpose is to review the empirical literature on the relationship between FDI and insurance services.

Does foreign direct investments in financial services induce financial development? Lessons from emerging economies

AbstractWe employ panel Vector Error Correction Models (VECM) and cointegration framework to identify the existence and direction of the causal association between foreign direct investment (FDI) in financial services and financial development for 26 emerging economies for the period 2003–2015. Our results show that there exists a long‐run cointegrating relationship between financial development and FDI in financial services after incorporating the extent of heterogeneity among emerging economies. We find long run unidirectional causality from financial development to financial services FDI. Using fully modified OLS (FMOLS) estimation, we estimate the long run elasticities between financial services FDI and financial development. Our results show that financial development has a positive and significant impact on FDI in financial services, which implies that a country with well‐developed financial markets tend to attract larger amounts of FDI in financial services.

The impact of foreign direct investment on the ecological footprints of nations

We study the effects of foreign direct investment (FDI) on the rate of exhaustion of bioproductive physical land. We test for differential ecological performance of FDI in developed vs. developing countries, as well as in “clean” vs. “dirty” sectors. We examine the impact of six sector-level FDI flows on four ecological footprints ( EF ): Consumption EF, Production EF, Imports EF, and Exports EF , compiled by the Global Footprint Network. We estimate a dynamic panel model incorporating an Environmental Kuznets Curve (EKC) and differentiating across country development levels. The findings are intriguing. First , High Income countries tend to experience a consumption-related ecological impact of FDI, whereas Low- and Middle-Income countries tend to experience a production-related ecological impact of FDI. Second , the burden of FDI-generated Exports EF is born disproportionately by Middle Income countries; High Income countries bear none (evidence of FDI ecological haven ). Third , in High Income countries, financial services FDI reduces the Production EF (evidence of FDI ecological halo ) . Finally , non-financial services FDI is more ecologically damaging than manufacturing FDI.

Determinants of FDI in producer services: evidence from Chinese aggregate and sub-sectoral data

PurposeThe purpose of this paper is to examine the determinants of foreign direct investment (FDI) in producer services in China using both country aggregate and provincial sub-sectoral data.Design/methodology/approachThis paper applies autoregressive distributed lag (ARDL) cointegration and panel data regression approaches in examining the determinants of Producer Service FDI (PSFDI).FindingsOur results show differences between the determinants of aggregate FDI and PSFDI. Contrary to the typical influencing factors of general FDI (that include GDP, openness, low wages and environmental quality), the two main determinants of PSFDI inflows to China are found to be high wages and research inputs (specifically the number of research workers as a proxy for research intensity). Data drawn from 26 Chinese provinces disaggregated at sub-sector level of producer services corroborate the results.Originality/valueWe add to existing literature by identifying the key determinants of inward PSFDI in China also via a provincial-level data analysis and disaggregation at sub-sectoral level of producer services.

Service Industry Liberalization and Gender Wage Gap

From a gender perspective, this paper uses the 2015 China Household Finance Survey (CHFS) data to examine the impact of service sector liberalization on the gender wage gap. The empirical results show that: first, in terms of the overall gender wage, the opening of the service industry has a certain impact on gender wages. Specifically, the service industry exports widen the gender wage gap, but the effect of service industry imports on its impact is not clear. Foreign direct investment in services not only raises the overall gender wage, but also narrows the gender wage gap; second, for workers with different skills, high-skilled women suffer less from the trade in services than low-skilled women, can benefit more from foreign direct investment, and have a smaller gender wage gap in the high-skilled workforce. Therefore, based on the above, this paper puts forward that China should weigh the advantages and disadvantages according to the actual situation, strengthen the guidance and management of service trade and continue to increase investment, and give full play to the important role of foreign direct investment in the service industry in raising labor income and narrowing the gender wage gap. It also increases women's educational opportunities and reduce the gender wage gap.