Foreign Direct Investment Projects Research Articles

Foreign Direct Investment Projects of Korean Companies

Choi, Yeana; Yuce, Ayse.January, 2016.Foreign direct investment projects of Korean companies,Articles,[Boston, U.S.]Boston University,10

Location decisions of inward FDI in sub-national regions of a host country: Service versus manufacturing industries

Built on the differences between services and manufacturing sectors, this study examines the general proposition that service and manufacturing multinational enterprises (MNEs) have different responsiveness to location-specific characteristics when conducting foreign direct investment (FDI), and that these differences influence their final locations in the sub-national regions of a host country. Using a full population of 1,212 and 6,199 inward FDI projects conducted by MNEs in manufacturing and services sectors, respectively, across 234 sub-national regions in Korea between 2000 and 2004, it finds that the location decisions made by service MNEs are more likely to be driven by demand-side considerations, whereas those made by manufacturing MNEs are more likely to be influenced by supply-side characteristics of sub-national regions. In addition, it shows that sub-national location decisions made by both high-tech and low-tech manufacturing MNEs consider the availability of local strategic assets within a focal region more importantly than that from its neighboring regions, suggesting the importance of intra-regional effects. Sub-national location decisions made by location-bound service MNEs exhibit the same intra-regional effects for local market potential; however, those by non-location-bound service MNEs consider the local market potential from neighboring regions more importantly than that within a focal region, suggesting the existence of inter-regional effects.

Is social entrepreneurship a greenfield for foreign direct investment? A conceptual and empirical analysis

AbstractBuilding on legitimacy and social strategy theories, this research proposes a conceptual and empirical framework that links social entrepreneurial activity (SEA) with foreign direct investment (FDI). Investing in foreign countries with a high degree of SEA contributes to increasing foreign investors’ legitimacy. Additionally, firms may consider SEA as a constituent of their social strategy. A key contribution of this study is the comprehensive conceptual framework used to analyze the link between social entrepreneurship and international business. The second key contribution is the econometric analysis of SEA's effect on greenfield FDI, foreign employment, and foreign projects. The estimation results of the gravity equation suggest that social entrepreneurship fosters FDI. This research offers theoretical insight on legitimacy theory's relevance in explaining the link between FDI and SEA. Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd.

The Influences of Formal and Informal Institutions on Taiwanese Family-owned Firms' Entry Mode Choice

This study is designed to shed further light on the foreign direct investment (FDI) decision by the family business, and address the question: Under what situation family-owned firms make the entry mode with high risk commitment. The data source for this study was obtained from Taiwan Economic Journal Database. The database is a comprehensive source for Taiwanese firms' foreign direct investments in 13 countries (Japan, U.S., Indonesia, India, France, Finland, Thailand, Malaysia, Netherlands, Philippines, Vietnam, Germany and Korea). This study included 2451 FDI projects. This study demonstrates that the formal and informal institutions influence a family firm's entry mode decision. In the informal institutions, the family- owned firms choose the joint venture (JV) arrangement. In the formal institutions, the family- owned firms choose the wholly owned entry mode. The results display what situation family-owned firms choose the entry mode.

Economics Institutions and the Outward FDI Location Strategies of Emerging Market Multinational Business Groups: Evidence from Central and Eastern European Countries

Using an extensive data set on the Outward Foreign Direct Investment (OFDI) projects from Central and Eastern European Countries (CEEC), this study empirically examines the impacts of host country economic institutions, including property rights protection, corruption, taxation, business operating regulations and economic stability, on firms' location decisions in the European Union (EU), while controlling for other conventional determinants of location choice. From a data set of 24,726 location decisions of 951 firms for a time period from 1995 to 2010, the robust empirical evidence suggests that a corruption-free country with a lower tax burden and friendly business regulations positively influence the OFDI location choice strategies of CEEC multinationals. However, these factors vary depending on whether the host country has an advanced economy (EU15: original member countries of the EU), or an emerging economy (CEEC). The effects of economic institutions are more profound on the location activities in the advanced economies of the EU than in other CEEC. Furthermore, CEEC investors generally prefer to be located in countries that have better institutions than their home countries.

Political strategies, entrepreneurial overconfidence and foreign direct investment in developing countries

Foreign investors in developing countries are exposed to comparatively high levels of environmental uncertainty and often use political activities to manage this uncertainty. At the same time, international entrepreneurs seek out uncertain environments, because of the potential opportunities and upside potential associated with uncertain situations. We investigate the interplay between political strategies and entrepreneurial overconfidence in managing environmental uncertainty based on an in-depth case study of an entrepreneurial foreign direct investment (FDI) project in Ghana. Our results provide insight into the individual and combined roles that political strategies and entrepreneurial overconfidence can play in international entrepreneurial decision-making in highly uncertain environments. In particular, we find that the adoption of political strategies can exacerbate entrepreneurial overconfidence and affect the survival of an investment.

Enterprises overseas cluster and foreign direct investment location choice of new entrants：An empirical research based on micro enterprises data in Zhejiang province

In this paper, we focused on the relationship of the overseas clusters and location choice for Chinese enterprises' foreign direct investment, both of which have recently become hot topics of theory research and policy concern. For there exists a big difference of economy condition in different host countries, China's enterprises pay attention to specific economic factors of host countries in location choice of foreign direct investment, and host countries' economic scale, per capita income, trade openness, resource conditions and other elements constitute the factors influencing location choice of enterprise' foreign direct investment. In addition,the overseas cluster of home countries' enterprises in host countries is another significant factor that cannot be ignored for enterprise' decision of foreign direct investment location choice. This paper structured the binary choice model by using the micro data of enterprises in Zhejiang province, and used the number of foreign direct investment projects in certain host country of Zhejiang's enterprises to measure the overseas cluster in that country. Based on these data, an empirical study was conducted in this paper and found that overseas enterprise cluster is an important location advantage for the host country to attract foreign direct investment from new enterprises. Furthermore, this advantage plays a greater role in countries that have richer resources and larger market scales. What is more, in order to eliminate the endogenous regression problem, the geographic distance was taken as the instrumental variable of enterprises' overseas cluster and a similar conclusion through two stage binary choice model was reached. We also found that the positive influence of enterprise overseas clusters on the attraction of new enterprises' foreign direct investment exist in both developed and developing host countries. The results of this paper indicated that there is self-continuity in the direct investment of foreign enterprises overseas cluster and reflected the importance of information in location choices for enterprises' foreign direct investment as well.

Influence of Foreign Direct Investment on Gross Domestic Product; an Empirical Study of Pakistan

Empirical study was conducted to assess the relationship and impact of Foreign Direct Investment (FDI) on the economic growth of Pakistan. FDI plays critical role in the development of economy. There is a positive relationship between the Gross Domestic Product (GDP) and Foreign Direct Investment (FDI). With the increase of FDI, GDP of the country also increases. It has been observed that in the developing countries GDP growth is more dependent on foreign direct investment. People Republic of China is from one of the recent examples. Chinese companies are investing a large amount in the different sectors of Pakistan. FDI is boosting country GDP and attracting multinationals organizations towards making investment in the country. It is found that world see Pakistan as an important destination for outward FDI projects because of its cheap labor cost, strategic location and investment incentives. It is expected that this research will be helpful to investors to comprehend an overall investment scenario as well as government policy makers to take necessary steps for creating a favourable investment climate for foreign investors in Pakistan. It has been observed that in 2012, there is 11.9% decrease in financial assets and direct Investment has increased by 10.6%. Direct Investment is 6.6% of total assets. Till 2011, Direct Investment in Pakistan was US $20,916 million but in 2012, with the increase of US$ 2,209 million it became US$23,126 million. During 2012, portfolio investment increased 24.1%.

The Role of Investment Promotion Agencies in Attracting Foreign Direct Investments in the Southeast European Countries

This paper aims to assess the role of national and regional agencies in attracting foreign direct investment (FDI) in the Southeast European (SEE) countries and to connect the findings from IPA’s staff with the determinants of FDI inflows. The research is conducted using survey data and panel data analysis. The results indicate small, inadequate, and unexploited potential of investment promotion agencies (IPAs). They have participated in a small number of FDI projects and most of the FDIs came into the region without their participation. They do not have a qualitative approach to FDI. Most of the regional agencies (except in Croatia and Kosovo) do not even envisage cooperation with foreign investors. The panel data research has shown that GDP per capita, wages, inflation (as economic variables), but also enterprise restructuring, tax rates, trade and forex system (institutional variables) have influence on FDI inward stock.

A Legal and Economic Analysis of Austria's Double Tax Treaty Network with Developing Countries

To what degree developing countries gain from signing double tax treaties is being hotly debated. In this paper, we analyze the Austrian tax treaty policy. Combining legal and economic perspectives, we find that developing countries are likely to expect both positive and negative impacts from signing a double tax treaty (DTT) with Austria. On the one hand, the results of our econometric analysis suggest that middle-income countries that sign a DTT with Austria may expect an increased number of foreign direct investment projects from Austrian companies. On the other hand, the signatory states may suffer from limited withholding taxation rights established in the DTTs for the source country, which could lead to reduced tax revenues in the developing countries. (authors' abstract)

Determinants of foreign direct investment and entry modes of Polish multinational enterprises: A new perspective on internationalization

This study uses firm data to examine the locational trends of foreign direct investment projects undertaken by Polish companies. The findings of the study are consistent with the evolutionary models of internationalization. Companies in the early stages of internationalization are motivated by markets and resource seeking, whereas efficiency seeking and strategic asset seeking are significant motivators in the advanced stages of internationalization. However, our results with respect to Polish cross-border acquisitions by service companies and greenfield foreign direct investments by industrial or manufacturing companies did not confirm the evolutionary model findings. We found evidence that, in both cases, investments are motivated by the need for efficiency or strategic assets.

Regional concentration of FDI in post-reform India: A district-level analysis

We analyze the concentration of foreign direct investment (FDI) in India at the district level, based on project-specific location choices since the reform program in the early 1990s. The decomposition property of the Theil index allows us to trace changes over time in the overall concentration of FDI to changes in concentration between and within subgroups of districts. We also differentiate between major types and sources of FDI. We find that FDI concentrated in a persistently decreasing number of districts. Concentration across those districts that received at least one FDI project within a given time interval also increased, but this increase leveled off in the more recent past. These trends hold for essentially all types and sources of FDI, while the average level of concentration varies considerably between these types and sources.

Ownership Choices of Indian Direct Investors: Do FDI Determinants Differ between Joint Ventures and Wholly Owned Subsidiaries?

Using count data on Indian joint ventures (JVs) and wholly owned subsidiaries (WOS), we present an empirical analysis of foreign direct investment (FDI)-related ownership choices and their relation with host country characteristics and indicators of transaction costs. Our Negative Binomial regression models offer only weak support for the bargaining perspective, according to which JVs should be more likely if the host countries were particularly attractive in terms of market access or resource endowments. Geographical and cultural distance has ambiguous effects on the choice between JVs and WOS. The composition of FDI projects tends to shift towards WOS where investment risks are contained by bilateral treaties and better control of corruption. JEL Classification: F21

Do International Investment Agreements Attract Foreign Direct Investment into Developing Countries?

The study is concerned with answering a question: what is the role of international investment agreements (IIAs) in attracting foreign direct investment (FDI) into developing countries? It reviews the literature on the impact of IIAs on the size of FDI into developing countries to the extent, to which such literature exists. This is the case for bilateral investment treaties (BITs) and regional integration agreements, but less so for bilateral free trade agreements (FTAs), nowadays including also investment provisions. In the absence of the literature the study relies on the conceptual discussion of possible impacts. Needless to say the literature, especially that on the impact of BITs on FDI, is not only far from reaching definite conclusions but also has come to conflicting findings. The study offers an own assessment of these findings and of the likely impact of IIAs on FDI. As regards the impact of BITs, the study concludes that there is evidence that BITs have played a role in a number of individual FDI projects, thus increasing FDI, but apparently these increases have not been large enough to be captured in aggregated flows of FDI used in most econometric studies. But in their rather narrow responsibilities, BITs constitute one of the most solid, although quite small, components of a coherent, transparent, predictable and stable investment framework of developing countries. Other agreements, and notably regional integration agreements, including investment and trade provisions, lead to new FDI. The impact is more evident in the case of FDI from outside of the economic grouping. EIIAs can also stimulate some intra-regional FDI. The latter impact can be strong when EIIA membership includes both developed and developing or transition countries.

Multinational Location Decisions and the Access to Imported Inputs

Although the influence of agglomeration economies on foreign direct investment location decisions is widely recognized in the literature, the nature of positive externalities is less well understood. This paper examines a particular source, access to specialized imported inputs, by applying a conditional logit model to the location decisions of Taiwanese multinationals in China. Our evidence, based on the 2,918 foreign direct investment projects approved between 1994 to 2006 in conjunction with Chinese customs data, reveals a positive effect of access to imported intermediate inputs and capital goods on the average investment, with effects that vary by industry group, time period and investment stage.

International experience and FDI location choices of Chinese firms: The moderating effects of home country government support and host country institutions

We examine the extent to which Chinese government support of foreign direct investment (FDI) projects and host country institutional environments interact with prior entry experience by Chinese firms, and how this interrelationship affects FDI undertaken by Chinese firms. We hypothesize that home country government support and well-established host country institutions enhance organizational capabilities to take risks in FDI. As such, they reduce the need to accumulate experiential knowledge and capabilities relating to entering host countries based on prior entry experience in a particular country when undertaking follow-up investment projects. Using a unique, hand-collected panel data set of Chinese publicly listed firms during 2002–2009, we find that home government support and well-developed host country institutions reduce the importance of prior entry experience and significantly increase the likelihood of FDI entry into a host country. Further, from our subsample analyses we identify differences between entering developed and developing host countries in terms of the impact of home country government support and quality of host country institutions. Our findings help explain the puzzle concerning why emerging economy firms have rapidly internationalized in a short period of time and do not follow the pattern predicted by classical IB theories.

Study on the Existing Problems and Their Countermeasures of the FDI Utilization in Jiangsu

Jiangsu Province has convenient ocean, land and air transportation and great transportation capacity. There are 128 regular higher education institutions in Jiangsu, ranking the first by number in China. By the end of 2012, Jiangsu has a gross product of RMB5405.822 billion, accounting for 10.4% of the GDP of China as per Jiangsu Statistics Bureau (2013). According to the statistics of the National Bureau of Statistics of the People’s Republic of China (2013), in 2012 in China, Jiangsu Province’s economy ranked the second. With its advantages Jiangsu has attracted foreign direct investment (FDI) from all over the world. In 2012, there were 4156 contracted FDI projects. The contracted and the actually utilized FDI values reached US$57.14109 billion and US$35.75956 billion respectively. Not only has FDI brought capital, advanced technology, state-of-the-art management methods etc. for Jiangsu, but also it plays a very important role in Jiangsu’s economic development. However, in Jiangsu’s utilizing FDI some problems are existing, such as industries tending to be of the low end, imbalance in industry distribution, weak absorptive capacity of high technology, leading to environment pollution etc. This paper aims at analyzing the problems by SWOT method and puts forward some countermeasures for Jiangsu to develop its economy effectively by means of FDI.

A Causal Linkage between FDI Inflows with Select Macroeconomic Variables in India – An Econometric Analysis

The paper endeavour to explore the short run and long run causal relationship between select macroeconomic variables (GDP, Exchange Rate & Inflation Rate) and FDI inflows in Indian context by applying Cointegration test followed by Vector autoregression (restricted/unrestricted) model and Granger- causality test. Further, by employing simple regression model, it tries to calculate the exponential growth rate of FDI inflows in India. Eventually, Chow test has been employed to detect the presence of significant structural break in the data series of FDI inflows. However, the results show that there prevails long run equilibrium among the concerned variables. The Granger-causality test results conclude that exchange rate and GDP statistically significantly influence FDI, whereas, inflation rate is insignificant variable to predict FDI inflows. Further, the growth analysis result claims that the total FDI inflows grow exponentially at a rate of 23% per annum. However, as stated by the results of Chow test, 1991-92 (the year of initiation of New Economic Policy in India) is a statistically significant structural break year in the context of FDI inflows in India. Keywords: FDI, New economic policy, Unit root test, Cointegration test, Vector error correction model, Granger-causality test, Structural break, Chow test. I. Introduction Foreign direct investment (FDI) can be termed as package of resources that complements the financial flows and makes a distinctive contribution to the development process. Foreign direct investment projects typically involve a transfer of technology and managerial skills from the source country to the recipient country and also provide greater access to world market for the recipient country's exports. Foreign Direct Investment (FDI) is fund flow between the countries in the form of inflow or outflow by which one can able to gain some benefit from their investment whereas another can exploit the opportunity to enhance the productivity and find out better position through investment with the purpose of long term then it is contributes positively towards economy. Depending on the industry sector and type of business, a foreign direct investment may be an attractive and viable option. The studies try to find out the implications which affect the economic scenario and also measure the level of predominance by the factors for economic contribution to India. 1.1 Evaluation of India's FDI Policy Measures The liberal policy measures towards FDI designed in the wake of structural adjustment and macroeconomic reforms in India since mid 1991 have helped attract foreign investors significantly. The amount of approved investment has grown enormously. Though the actual inflow of FDI has not picked up so fast, it has improved and significantly strengthened the capital account of the balance of payments of the country. India is still on a lower ladder among some major FDI receiving countries of Asia. Nevertheless, only six or seven countries claim well over one half of the total FDI flows. With the opening up of new areas for foreign investors, a huge amount of approval and actual inflow is also found in non-traditional areas, such as fuel and power, services and some consumer goods. Though the automatic approval route was introduced for speedier clearance of FDI proposals, its reach and role have been marginal. The policy lacked thrust on attracting investment in sectors that offered comparative cost advantage. Well-developed and strategically located platforms in the form of Export Processing Zones (EPZs) or technology parks have not been provided for mobilizing investment into these sectors. The thrust was not on export orientation due to conservative sector-specific policies. Rigid labour laws had been other serious impediments to FDI inflows. Besides, there was lack of transparency and clarity about micro-level procedure at the state level. To sum up, it can be said that the Indian Government has created a healthy atmosphere for FDI inflow by introducing Structural adjustment and Stabilization policy.

The determinants of the location of foreign direct investment in UK regions†

This article employs a database of over 2000 observations of Foreign Direct Investment (FDI) projects in UK regions. We analyse this data by means of various multinomial and conditional logit models in order to identify the major determinants of the location choices of these inward investments. Having controlled for the various characteristics of inward investing firms, the projects and the regions, our results suggest that existing regional specialization is the single most important determining feature of where inward FDI locates. In addition, London is seen to benefit primarily by the immigration of new investments, the majority of which are related to service sector activities.

The effect of the great recession on foreign direct investment: global empirical evidence with a gravity approach

This article estimates the effect of the present global systemic banking crisis on foreign direct investment (FDI) using the gravity equation on a sample of 161 countries over the period 2003 to 2010. Systemic banking crises, through demand shocks and credit constraints, may impact FDI in two ways: aggregate monetary flows and individual projects count. Since gravity equations account for output variations, our research relies on the financial constraints channel. We find that the great recession, through credit constraints on home supply markets, has reduced the number of FDI projects, but not their size, forcing investors to become more selective on their international endeavours.