Patterns Of Foreign Direct Investment Research Articles

Talent management: a capital question

Against the backdrop of globalisation with shifting patterns of foreign direct investment and a rise in global mobility, talent identification, development and deployment, along with the national and organisational systems and structures necessary for its effective engagement, management and retention have become a critical focus for academics and practitioners. Framing it as a critical capital question, this introductory paper summarily outlines core debates in this nascent literature. It then introduces the five papers that comprise the issue and highlights the contributions that they make to furthering aspects of the debate on talent and intellectual capital from a variety of perspectives.

FDI and Growth of Service Sector in India

In the contemporary globalised economy, service sector attracts the major share of Foreign Direct Investment (FDI) in the world. India being a part of this phenomenon also attracts most of its FDI in the service sector. The present paper highlights the trend in FDI movement in the world in general and India in particular. Further, it reviews the FDI policy in India in the post liberalized period. The growth of FDI in services sector may be attributed to the changing pattern of global FDI and also the liberalization and globalization policies pursued by India. Since 2000, the high inflow of FDI has resulted in the growth of new services viz., financial and non-financial services, telecommunication, computer software and hardware, hotel and tourism, construction activities and real estate. The growth of services sector had led to the growth of export of services from India which now accounts the majority of export from the country.Keywords: FDI, Services sector, Export, Liberalization.

A Linder Hypothesis for Foreign Direct Investment

We study patterns of foreign direct investment (FDI) in a multi-country world economy. We develop a model featuring non-homothetic preferences for quality and monopolistic competition in which specialization is purely demand-driven and the decision to serve foreign countries via exports or FDI depends on a proximity-concentration trade-off. We characterize the joint patterns of trade and FDI when countries differ in income distribution and size and show that FDI is more likely to occur between countries with similar per capita income levels. The model predicts a Linder Hypothesis for horizontal FDI, which is consistent with some patterns we find using establishment-level data on multinational activity

Are there any top FDI performers among EU-15 and CEE countries? A comparative panel data analysis

This paper examines the major determinants of foreign direct investment (FDI) inflows in 26 European Union (EU) countries using panel data. Our empirical study takes a different approach by separating European countries into two groups: Western (EU-15) countries and Central and Eastern European (CEE) countries. The results from the panel data analysis of FDI inflows to 26 EU countries for the period 1994-2012 show that: (1) traditional location variables such as market size, trade openness, unemployment, infrastructure, tax rate and unit labour costs are able, to a large extent, to explain FDI flows to both groups of countries; (2) there are country-specific factors such as economic growth, unit labour costs and credit risk that contribute to the differences in FDI patterns across EU-15 and CEECs; and (3) policy and institutional quality factors are found to play an important role for both groups of countries. When analyzing host countries based on their relative level of performance, we find that the top ten FDI performers are able to attract a significant amount of FDI because of their macroeconomic stability and high level of institutional development, while for EU countries with low FDI dominance, policy and institutional risk factors play a more important role.

A Study of Drivers, Impact, and Pattern of Foreign Direct Investment in India

Till 1991, there was excessive control of Government over economy with inward looking policies leading to over protection of economy leading to deterioration of trade, economic growth and large fiscal deficits financed by external borrowings. Foreign currency reserves plummeted to very low levels. Since then India has seen a steady set of reforms in LPG mode with foreign investment playing important role. In this study data has been obtained from secondary sources, mainly government and global bodies. Literature cited has been taken with reference to India or generic in nature and problems identified. Policies needed for attracting FDI are not very different from those required for domestic investors. Preferential for FDI may act as an extra incentive. Foreign Portfolio investment is contingent upon returns expected from capital market and home country issues. Foreign direct investment has slowly moved from manufacturing to service sector probably because of easy entry and exit conditions as well as leveraging labour arbitrage. In this study we have reviewed papers on determinants, patterns and impact of FDI and FII/FPI on Indian economy for the period 1991–2012 and attempted to find out interrelation between FDI and FII/FPI inflows.

Accounting for quality differences in human capital and foreign direct investment

This paper empirically investigates how cross-country differences in the quality of human capital, as they are captured by the conventional measures of international test score differences, influences the patterns of foreign direct investment. Using panel data covering 32 countries during the period between 1985 and 2004, this paper finds that a host country's quality of educational attainment plays an independent role in attracting foreign direct investment. In particular, the quality of human capital influences horizontal foreign direct investment, even after accounting for the roles of skill and factor endowments, trade costs, investment costs, and country-size and income effects.

Environmental regulation and foreign direct investment: Evidence from South Korea

This paper studies how environmental regulation shapes the pattern of foreign direct investment (FDI), and thereby assesses the pollution haven hypothesis. Conflicting results exist in the case studies examining the most advanced countries, partly due to the deterrent effect of clean technology adoptions on industry migration. To minimize the clean technology effect, we examine the pattern of South Korean FDI over 2000–2007, the period that Korean firms relied on old production technologies despite facing rapidly strengthened environmental standards. A difference-in-differences type identification strategy circumvents other potential confounders. We find strong evidence that polluting industries tend to invest more in countries with laxer environmental regulations in terms of both the amount of investment (intensive margin) and the number of new foreign affiliates (extensive margin). A similar finding is obtained when imports are analyzed.

Tariffs and EU countries foreign direct investment: Evidence from a dynamic panel model

According to the models of the multinational enterprise tariffs play a fundamental role in determining the pattern of foreign direct investment (FDI). The aim of this paper is to assess the impact of tariffs on the outward stocks of FDI of the European Union (EU). We estimate a model based on the knowledge–capital theory of the multinational enterprise over the period 1995–2008 by using a sample of five EU countries and 24 partner countries. We consider, first, manufacturing sector as a whole and, then, six manufacturing industries defined at the two-digit level of the Nomenclature statistique des activités économiques dans la Communauté européenne (NACE) classification. Explanatory variables include an index of applied bilateral tariffs and a dummy to capture the presence of bilateral investment treaties (BITs). A dynamic panel model is estimated through the generalized method of moments estimator, taking also into account the endogeneity of regressors. The results show that the pattern of EU outward FDI is a mix of vertical and horizontal FDI. BITs in force have a significant and positive impact on the outward FDI. The impact of tariffs varies across industries and countries, suggesting the predominance of horizontal FDI in some industries, and the existence of vertical FDI in others.

Environmental Regulation and Foreign Direct Investment: Evidence from South Korea

This paper studies how environmental regulation shapes the pattern of foreign direct investment (FDI), and thereby assesses the pollution haven hypothesis. Conflicting results exist in the case studies examining the most advanced countries, partly due to the deterrent effect of clean technology adoptions on industry migration. To minimize the clean technology effect, we examine the pattern of South Korean FDI over 2000–2007, the period that Korean firms relied on old production technologies despite facing rapidly strengthened environmental standards. A difference-in-differences type identification strategy circumvents other potential confounders. We find strong evidence that polluting industries tend to invest more in countries with laxer environmental regulations in terms of both the amount of investment (intensive margin) and the number of new foreign affiliates (extensive margin). A similar finding is obtained when imports are analyzed.

Patterns of Foreign Direct Investment in Romania: Low Tech Investments versus High Tech Investments

Foreign direct investment (FDI) has gained significant importance over the past decade as a tool for accelerating growth and development of economies in transition. The Eastern-European countries were the destination of some significant capital inflows because of some important features of each market, as: development level of the infrastructure, labor force characteristics, market size and its future development potential, regulation level of the market, liberalization level of the prices, tax policies and technology absorption capability.When talking about foreign direct investments it is very important to analyze the level of technology of the investment because that particular characteristic can provide a very clear description of the development level of the chosen region. Therefore the main goal of this research paper is to provide a clear description of the similarities and of the differences of the two investor types (low tech, high tech), both at national and regional level.

Present international patterns of foreign direct investment: underlying causes and some policy implications for Brazil

An important feature of the 1980s has been the substantial fall in the flow of foreign direct investment (FDI) to the developing countries and also, with the limited exception of the Asian NIE (Korea, Taiwan, Malaysia, Singapore) and China, to the newly industrialized countries, in particular those in Latin America. FDI has been concentrated more than ever among the advanced industrialized countries of OECD. The same period has witnessed a number of extremely important changes, both in the nature and location of basic or key technologies, the role of technology in industrial competitiveness; the most appropriate industrial management paradigm following the difficulties of the "Fordist" one; the nature of predominant international supply or market structures; and the relationships between productive and financial capital. Today a number of governments in developing countries and in NIC, among them the new government of Brazil, are again engaged in an attempt to attract FDI and to make foreign capital one of the major pillars of industrial revival and future growth. This paper argues that this policy objective is both fairly illusory and largely mistaken. It is fairly illusory in that it seriously underestimates the nature and strength of the structural factors which have been at work since the mid-1970s and seriously modified the strategies and investment priorities of the TNC which under took the brunt of the investment in developing countries and NICs in the earlier "golden age" of the 1960s and 1970s . The objective of luring foreign capital again to Brazil in ways and on a level similar to the 1960s is also largely mistaken in that it fails to recognize that the change in technological paradigms has modified the parameters of international technology transfers (cf. Ernst and O'Connor, 1989) and made indigenous and endogenous industrial growth dependent to a much higher degree than in the previous period (19601975) on factors which foreign capital cannot and will not bring to or build in host countries and which must be created and built indigenously.

European Community tariff preferences and foreign direct investment

The work looks at the impact of discriminatory tariff changes of a non-reciprocal character on the locational choices of multinational enterprises. The author offers an analytical framework within which the implications of non-reciprocal tariff preferences on the locational strategies of multinational enterprises are directly derived from the theory of economic integration and preferential trading. Then, the pattern of foreign direct investment in the counties that are recipients of EC tariff preferences is looked at, providing support for the the author’s hypothesis.

Foreign direct investment (FDI) determinants and spatial spillovers across Mexico's states

This article studies the location pattern of foreign direct investment (FDI) in Mexico for the period 1994–2004. An empirical model is specified based on recent FDI theories. This model is estimated using state-level data and employing spatial econometric techniques. Results suggest that higher education levels and lower delinquency rates are important determinants to attract FDI. Results also suggest a relationship of complementarity between inbound FDI to the host state and inward FDI to its neighboring states.

Determinants of cross-border merger premia

Firms have a broad range of rationales for engaging in cross-border mergers and other forms of foreign direct investment (FDI); while some companies are in search of the cost advantages provided by foreign resources, other firms are primarily interested in gaining access to new markets. Although a significant amount of research has explored the patterns of FDI, little work has been done to assess what influences the value of cross-border mergers and, in particular, what determines why some cross-border mergers are expected to result in higher synergies when compared to others. This paper explores what characteristics of a merger are expected to increase the synergies that a firm will accrue from a cross-border merger by testing how a variety of factors impact the premia paid to effectuate a cross-border merger. We find that firms are willing to pay a higher premium to obtain greater control over foreign firms, and that this control is even more important in mergers involving firms in emerging markets. We also find that the factors affecting deal premia in cross-border mergers differ based on whether the acquirer has a high or low intangible asset intensity level.

Foreign Direct Investment (FDI) Determinants and Spatial Spillovers Across Mexico's States

This paper studies the location pattern of Foreign Direct Investment (FDI) in Mexico for the period 1994-2004. An empirical model is specified based on recent FDI theories. This model is estimated using state-level data and employing spatial econometric techniques. Results suggest that higher education levels and lower delinquency rates are important determinants to attract FDI. Results also suggest a relationship of complementarity between inbound FDI to the host state and inward FDI to its neighboring states.

Capital flows to emerging economies during and after the global financial crisis in 2008

This paper analyses dynamics of various types of capital flows to emerging economies during and after the global financial crisis. The first part discusses dynamics of various types of international capital flows during the global financial crisis. The second part focuses on the regional distribution of capital inflows to emerging markets economies. The third part raises the issue of the changed pattern of foreign direct investment, observed during and after the global crisis. The fourth part discusses possible policy responses for dealing with volatile capital flows to emerging market economies.

Foreign direct investment with Chinese characteristics: A middle path between Ownership-Location-Internalization model and Linkage-Leverage-Learning model

The majority of multinational enterprises (MNEs) traditionally originate from developed countries. In the last ten years, however, there has been dramatic growth in foreign direct investment (FDI) from China. It is a comparatively new phenomenon that challenges the classic FDI theories. In this paper, we review the pros and cons of two important theories, known as the Ownership-Location-Internalization (OLI) model and Linkage-Leverage-Learning (LLL) model, and use the statistical data and company case studies from China to test the plausibility of these two models. We believe that neither of them suits totally: the OLI model is quite useful for understanding FDI from China to developing economies, while the LLL model is more powerful for explaining the FDI to developed economies. We argue that the companies from China attain a very advantageous position as intermediates in the global economy. They may catch up with the first movers if they integrate OLI-led and LLL-led FDI within one firm. This combination can bring together the most advanced knowledge acquired in developed economies with the knowledge about adaptation needs and the needs for cost reduction in production as expressed in developing economies. It may also accelerate the knowledge transfer globally. We thus fill a gap in research into the geographical pattern of Chinese FDI and offer a deeper understanding of the internationalization of Chinese MNEs and revolving knowledge transfer.

Some Reflections on Foreign Direct Investment Flows and the Viet Nam’s Economy

This paper examined the comparative trend and pattern of foreign direct investment (FDI) flows in Vietnam over the period (2001-2011) in the ASEAN setting. Astonishingly, the period study has detected a declining trend of FDI inflows in Vietnam at the end of the preceding decade and being of the current decade. Together with the Vietnamese other parameters, the business environment is, thus, analyzed for a better perception and galvanizing ideas for policy diagnosis in the future course of direction of the FDI into the country. Moreover, for a better regional contribution, a formation of VCLT-DS (Vietnam, Cambodia, Laos, Thailand, and Development Square) similar to the IMT-GT (Indonesia, Malaysia, Thailand Growth Triangle) is suggested for the consideration of the concerned political authorities.

Changing of the Investment Climate of Georgia after the War

This study aims to investigate factors determining flow of FDI in Georgia, especially after the war with Russia. The key poin t of the analysis is the impact of stability of economic and legal environment on the pattern of FDI. I also tried to examine in this paper the changes of investors’ opinion concerning the investment climate of Georgia after the war and global finance crisis in 2008. This work, I believe, will also fill the knowledge gap in the area of foreign direct investment (FDI) research on Georgia. The analysis focuses on major obstacles faced by investors. I first identify and then quantify the major obstacles for both foreign and domestic investors using the case studies of investors in Georgia and the statistics obtained from these data. The study results indicate that the most serious problem for investors is the political instability. I also found that the issues such as government regulations (regulatory burden), infrastructure, safety or corruption do not act as major deterrents of FDI inflows, especially after the successful reforms of the Saakashvili government. It was also found that most investors have been satisfied with their operation.

Foreign Direct Investment and Trade: Complements or Substitutes? Empirical Evidence for the European Union

International trade and foreign direct investment (FDI) have grown at fast paces during the last decades. At this point, however, it is not clear whether trade and investment are regarded by firms as complementary ways of accessing other markets, or, instead, if they are employed as alternative strategies. This paper examines this issue empirically, for the particular case of Europe, an area in which commercial and economic integration has gained remarkable momentum since 1992. More specifically, we test whether the reduction of trade barriers over time among the members of the European Union (EU) has increased not only trade flows but also FDI within those countries. We estimate a gravity model using the Hausman-Taylor estimation technique – to circumvent time invariability and endogeneity – for intra Europe FDI and, separately, for FDI to the EU members with origin in third countries. In addition to trade integration measures, we also analyze the potential role of other traditional determinants of FDI, as the market size of the host country and the cost differential among home-host economies. Our results suggest that EU commercial integration and FDI reinforce each other, thus being complements rather than substitutes in Europe. This effect is apparent for the intra-EU FDI and also for investment coming from countries outside the EU. Cost differentials are not as relevant as the possibility of gaining market share which leads us to conclude that in the EU the FDI pattern follows a horizontal strategy rather than a FDI vertical model.