Inbound Foreign Direct Investment Research Articles

Does institutional reform of intellectual property rights lead to more inbound FDI? Evidence from Latin America and the Caribbean

Leveraging a 14-year panel of 18 Latin American and Caribbean countries, we advance the institution-based view in international business research by focusing on how institutional reform of intellectual property rights (IPRs) matters in developing countries. We propose how the adoption timing of an international treaty, the Paris Convention on Industrial Property Rights, leads to more inbound foreign direct investment (FDI). Further, we propose how time spent with this IPR reform interacts with the host country's innovation base to affect inbound FDI. Our findings indicate that more reform time is negatively associated with inbound FDI, but FDI increases for more reform time within countries with substantial domestic innovation bases.

The Consequences of Corruption: Evidences from China

With complementary Chinese data sets and alternative corruption measures, we explore the consequences of corruption. Adopting a novel approach we provide evidence that corruption can have both, positive and negative effects, on economic development. The overall impact of corruption might be the balance of the two simultaneous effects within a specific institutional environment (“grease the wheels” and “sand the wheels”). Corruption is observed to considerably increase income inequality in China. We also find that corruption strongly reduces tax revenue. Looking at things from an expenditure point of view we observe that corruption significantly decreases government spending on education, R&D and public health in China. We also observe that regional corruption significantly reduces inbound foreign direct investment in Chinese regions, which indicates that the pollution haven hypothesis may not hold in China. This finding sheds a new light on the “China puzzle” that China is the largest developing host of FDI while it is appears to be very corrupt. Finally we observe that corruption substantially aggravates pollution probably through loosening environment regulation, and that it modifies the effects of trade openness and FDI on the stringency of environmental policy in a manner opposite to that observed in literature to date.

Explaining the determinants of manufacturing and non-manufacturing FDI inflows in five UK regions

This paper explores a range of factors that influence the attraction of inbound Foreign Direct Investment (FDI) in the manufacturing and non-manufacturing sectors of five regions in the UK (the South-East, West Midlands, Wales, Scotland and the North-West) by using longitudinal data over the period from 1980 to 2002. Multiple regression analysis is employed in order to identify those factors that exercise a major influence over the attraction of FDI to each region; to highlight significant differences that exist on a region-by-region basis; and to consider the resultant implications for government policy makers. The findings suggest that there may be marked differences in the strategic determinants and specific motives which attract inbound manufacturing and non-manufacturing FDI to various UK regions. Governmental policy makers should therefore tailor their inward investment policies more closely to the key influences that draw in these two types of FDI, in order to maximise future FDI inflows at the UK regional level.

Open Society, Closed Market?

It appears that Japan pursues a lopsided internationalization strategy—keeping foreign companies out while at the same time investing massively in foreign markets. This paper examines whether this is an appropriate position. First, we look into the foreign direct investment issue and try to understand the current situation in Japan. In particular, we analyze the underlying two-fold assumption: (a) that there are international companies willing and able to make large investments in Japan, and (b) that they cannot do it because the Japanese market is closed. The ratio of inbound FDI (foreign direct investment) to GDP is considerably lower in Japan than in other major industrialized nations, and Japanese companies directly invest four times as much abroad as foreign companies invest in Japan. This does not mean, however, that the Japanese market is closed. In fact, companies are deciding to invest in other countries where conditions are (or are perceived to be) more conducive to penetration. Second, we compare FDI with cross-border portfolio investments. Compared to FDI, portfolio investments in listed companies in Japan are relatively high. Foreign investors hold around one-fourth of the shares at listed companies. This figure has been rising continuously for 20 years, interrupted only in 2001–02 and in 2008–09. Third, we take a closer look at Japan's international trade and the overseas business of Japanese companies. Japan's industrial sector has integrated itself very actively in global trade (45 % of its sales are posted overseas), but the Japanese economy is not “export-driven”. Its degree of integration into world trade is rather low. We assume that this can be explained by qualitative, HR-related factors. Finally, we ask what the chances are that ongoing internationalization will succeed amid and after the global recession of 2008–09.

Exchange rate volatility in Latin American and the Caribbean region: Evidence from 1985 to 2005

Using a total of 28 Latin American and Caribbean countries, this study finds a negative relationship between trade and exchange rate volatility. The econometric tool for this specific analysis is the widely used gravity model, in a panel data context. A similar condition is detected between inbound foreign direct investment and exchange rate volatility. The results of the study support the hypothesis that significant exchange rate volatility has a negative impact on the economies of the region and that achieving exchange rate stability should be a goal of policy makers in the context of Latin America and the Caribbean.

Exploring the Regional Distribution of Inbound Foreign Direct Investment in the UK in Theory and Practice: Evidence from a Five-Region Study

Fallon G. and Cook M. Exploring the regional distribution of inbound foreign direct investment in the UK in theory and practice: evidence from a five-region study, Regional Studies. This paper examines the main factors that attract inbound foreign direct investment (FDI) at the UK regional level using econometric data from five sample UK regions (the South East, the West Midlands, the North West, Wales, and Scotland) broadly representing the country's regional economic divide. The findings indicate that regional and national (but not European Union-level) factors, linked to several underlying strategic determinants, help determine the regional distribution of inbound foreign direct investment, and its inter-regional variation. The paper concludes that governmental policy-makers at the national and regional levels can have an important role to play in drawing targeted foreign direct investment inflows to the UK regions. Fallon G. et Cook M. Examiner la distribution régionale de l'IDE au Royaume-Uni, en théorie et en pratique: des preuves provenant d'une étude à cinq régions, Regional Studies. A partir des données économétriques provenant d'un échantillon de cinq régions au Royaume-Uni (à savoir, le Sud-Est; les West Midlands, le Nord-Ouest, le Pays de Galles et l'Ecosse) qui représentent grosso modo le clivage économique régional du pays, cet article cherche à examiner les facteurs qui attirent l'investissement direct étranger (IDE) au Royaume-Uni sur le plan regional. Les résultats laissent voir que des facteurs d'envergure à la fois régionale et nationale (mais non pas au niveau de l'Ue), liés à plusieurs déterminants stratégiques sous-jacents, contribuent à la délimitation de la distribution régionale de l'investissement direct étranger et de sa variation interrégionale. En guise de conclusion, l'article affirme que les décideurs aux niveaux national et régional pourraient jouer un rôle important dans la détermination des flux d'investissement étranger qui visent le Royaume-Uni. Localisation de l'investissement direct étranger (IDE) Régions du R-U Déterminants stratégiques Motifs spécifiques Implications pour la politique du gouvernement Fallon G. und Cook M. Untersuchung der regionalen Aufteilung von in Großbritannien eintreffenden ausländischen Direktinvestitionen in Theorie und Praxis – Belege aus einer Studie unter fünf Regionen, Regional Studies. In diesem Beitrag untersuchen wir die wichtigsten Faktoren, die auf der Regionalebene Großbritanniens ausländische Direktinvestitionen anziehen. Hierfür verwenden wir ökonometrische Daten aus fünf britischen Regionen (Südosten, West Midlands, Nordwesten, Wales und Schottland), die die regionale wirtschaftliche Teilung des Landes ungefähr repräsentieren. Aus den Ergebnissen geht hervor, dass regionale und nationale Faktoren (nicht jedoch Faktoren auf EU-Ebene), verknüpft mit mehreren zugrundeliegenden strategischen Determinanten, zur Festlegung der regionalen Aufteilung der eintreffenden ausländischen Direktinvestitionen und ihrer interregionalen Schwankungen beitragen. Wir ziehen das Fazit, dass die Regierungspolitiker auf nationaler und regionaler Ebene eine wichtige Rolle dabei spielen können, ausländische Direktinvestitionen zielgerichtet in britische Regionen anzuziehen. Standort von eintreffenden ausländischen Direktinvestitionen Britische Regionen Strategische Determinanten Spezifische Motive Konsequenzen für Regierungspolitik Fallon G. y Cook M. Análisis de la distribución regional de la IED en el Reino Unido en teoría y práctica; resultados de un estudio de cinco regiones, Regional Studies. En este artículo examinamos los factores principales que atraen la inversión extranjera directa (IED) en las regiones del Reino Unido usando datos econométricos de cinco muestras de regiones británicas (Sureste, West Midlands, Noreste, Gales y Escocia) que representan en gran medida la división económica regional del país. Los resultados indican que los factores regionales y nacionales (sin embargo, no a nivel comunitario), relacionados con varios determinantes estratégicos subyacentes, ayudan a determinar la distribución regional de la inversión extranjera directa receptiva y sus variaciones interregionales. Para terminar, argumentamos que los políticos del gobierno a nivel nacional y regional pueden tener una función importante en cuanto a atraer influjos dirigidos de inversión extranjera directa a las regiones británicas. Ubicación de inversión extranjera directa (IED) Regiones británicas Determinantes estratégicos Motivos específicos Implicaciones para la política gubernamental

The impact of deviation from relative purchasing power parity equilibrium on U.S. foreign direct investment

Analyzing inbound and outbound foreign direct investment (FDI) between the U.S. and seven developed countries over the period from 1994 to 2004, this study provides strong evidence for a positive relationship between aggregate FDI flows and a strengthening of a home currency. Further, taking exchange rate disequilibrium into account, we find that an increase in U.S. inbound FDI is related to a strengthening of an undervalued and overvalued U.S. dollar, while an increase in U.S. outbound FDI (foreign inbound FDI) is mainly related to a strengthening of an overvalued foreign currency. Disaggregate FDI flow data show that these findings hold mainly for the manufacturing (food and machinery) and the wholesale industry. We argue that our findings may provide evidence for a co-existence of the wealth-effect hypothesis and a more profit and production oriented hypothesis, once the U.S. dollar is undervalued. Additionally, the results support the argument that the profit and production oriented hypothesis dominates the wealth effect in developed countries, especially in the manufacturing and wholesale industry. Moreover, the results support the view that foreign investors are interested in how overvalued or undervalued a currency is, rather than being interested only in the recent direction of change in the exchange rate. Finally, all findings are robust with respect to several estimation procedures.

FDI in Bulgaria and Romania in the Wake of EU Accession

Bulgaria's and Romania's transition from central planning to market economy has been long and difficult. The lateness of their transformation made their entry into the European Union possible only three years later (in 2007) than the other transition-economy candidates for membership. The delayed transition and ‘Europeanization’ of Bulgaria and Romania have been reflected in the patterns of their inward foreign direct investment. Almost three quarters of these inflows accumulated since the beginning of transition have been attracted after the Thessaloniki Summit in 2003 which locked the date of their entry into the European Union. Moreover, there are questions surrounding the quality and the development impact of inbound foreign direct investment. Despite the major labour cost and corporate tax advantages of locations Bulgaria and Romania, these countries have attracted relatively few efficiency seeking projects, mostly in garments and footwear, an industry that may be under global competitive threat. Potentially, however, they could become the ‘workbench’ within the European Union for many other industries, too. In the near future, the main challenge of these low-income locations is how to ensure that their investment potential materializes. To arrive there, it is important to further improve the business environment (as a continuation of the impressive pre-accession efforts) by strengthening the judiciary system, fighting against corruption and in Bulgaria, against organized crime.

AVAR Analysis of the Impacts of Company Tax Rates on Foreign Direct Investment and other Macro-economic Variables in Australia

Taxation policy has been recognized as a main determinant of foreign direct investment (FDI). However, the effect of taxation policy on other key macro-economic variables of interest has received little attention in the literature. This paper seeks to establish the long-run effects of a change in the Australian company tax rate on inbound FDI and other Australian macro-economic variables using vector autoregression (VAR) analysis to account for the interrelatedness of the variables under consideration. Results indicate that FDI, real gross domestic product (GDP) and trade with the rest of the world are all responsive to a change in the company tax rate.

The Legal Framework of Swiss International Trade and Investments

In 2004, Switzerland ranked as the 16th-biggest importer and 21st-biggest exporter of goods and the 10th-biggest importer and 18th-biggest exporter of services worldwide,1 a remarkable figure for a country with a population of less than seven-anda-half million persons.2 At the same time, it ranked 15th for inbound foreign direct investment (FDI) flows but 9th for outbound investment flows.3 The stocks of inbound FDI amounted to 50.6 per cent of Switzerland’s gross domestic product (GDP) thus ranking 13th, but the stocks of outbound investments exceeded Swiss GDP by 9.8 per cent or a notable 5th rank.4 Obviously, Switzerland’s external economy represents a vital component of its economy.

A Classification of International Business Strategies in the Czech Republic: A Longitudinal Analysis of Selected Firms

This study is focused on relationship between external and internal impact on decisionmaking influencing international business strategies in transitional economy. Drawing from secondary and primary interview data on international business activities of 18 startups and 20 enterprises operating in the Czech Republic (including firms controlled by both domestic and foreign investors), respectively, the authors propose five strategies. In general, the findings suggest that strategies developed by domestically owned niche-focused or recent startups and those carefully guided by inbound foreign direct investors are more successful. Moreover, the more successful (i.e., those experiencing significant domestic and international sales growth) are those who develop unique marketing strategies. Uncontrollable externalities do not appear to have an impact on firms’ success or failure. The regionally oriented exporting tends to be the dominant strategy. Globally oriented export activities are relatively modest whereas outbound direct investment strategies are very minor compared with inbound foreign direct investment activities.

US county-level determinants of inbound FDI: evidence from a two-step modified count data model

We employ a two-step modified count data model to determine the county-level attributes that are conducive to attracting new foreign plants. Our estimation results indicate that previous counts of foreign direct investment, market size and accessibility, and land area are positively related to Foreign Direct Investment (FDI) occurrences; while higher input costs deter new foreign firm entry. Contrary to anecdotal evidence, our results suggest that stringent environmental regulations do not have a negative impact on FDI inflows. These findings have significant implications for policymakers, as flows of FDI are expected to increase dramatically given the economic integration of our global economy.

Expanding the levels of analysis of fdi for improved understanding of policy issues: the case of mexico

Foreign Direct Investment (FDI) inflows are a key component of the restructuring and external integration now underway in many Latin American national economies. This paper suggests that understanding of policy issues concerning FDI can be enriched by two complementary shifts in the levels of analysis of FDI, each of which entails more detailed attention to the strategies and operations of multinational corporations (MNCs). At the macro-level, we show why it is beneficial to expand beyond the normal analytic concern with aggregate total FDI flows to focus instead on the separate, disaggregated components of those flows--that is, equity, reinvested earnings and other long-term and short-term capital flows between parent firms and their affiliates, as recorded in the national balance of payments capital account. The microlevel shift emphasizes the importance of focusing on varieties of types of FDI, not only across different foreign investors but within individual companies as well. It demonstrates the significance of switching from the usual concentration on firms as a whole to instead accentuating examination of individual projects and products--especially the dichotomy between market-access projects producing for the host country domestic market and production-efficiency projects producing for export markets, including the home country market. These two shifts in the level of analysis complement one another, and they interact in the sense that the mix of component flows can depend in part on the type of FDI. These analytic themes are developed using evidence concerning FDI in Mexico, with special reference to the automotive industry. Such improved comprehension of FDI is particularly germane for Latin American countries that are contemplating liberalization of foreign direct investment rules or have already undertaken them and witnessed the ensuing increase of inbound FDI.

CENTRAL AND EAST EUROPEAN TRADE ORIENTATION AND FDI FLOWS: PREPARATION FOR EU MEMBERSHIP

At the June 1997 Amsterdam Intergovernmental Conference (IGC) the heads of state of the 15 European Union (EU) nations decided to expand to the East. At the Luxembourg IGC in December 1997, they invited the Czech Republic, Hungary, Poland, Estonia, and Solvenia from Central and East Europe (CEE) and Cyprus from the Mediterranean region to begin admission talks in early 1998. Efficient involvement in international trade and the division of labor through foreign direct investment (FDI) are two of the most important prerequisites to economic transformation, modernization, and sustained economic growth. Thus, trade reorientation by the CEE nations from the former Council for Mutual Economic Assistance (CMEA) region to the OECD region in general and the EU in particu lar, as well as the volume and nature of inbound FDI are among the most reliable indicators of these countries' abilities to meet the EU admission standards. Trade reorientation by the CEE nations and FDI inflows between 1990 1995 have established a sound basis for effective economic transformation and modernization. It has also increased the ability of selected industries to compete in the EU Single Market. By 1997 the CEE nations were in a good position to generate sustained economic growth and to gradually meet the EU admission requirements.

The European Internal Market Programme and Inbound Foreign Direct Investment

JCMS: Journal of Common Market StudiesVolume 35, Issue 2 p. 189-223 The European Internal Market Programme and Inbound Foreign Direct Investment† John H. Dunning, John H. Dunning Graduate School of Management, Rutgers University, University Heights, 180 University Avenue, Newark, New Jersey 07102-1895, USASearch for more papers by this author John H. Dunning, John H. Dunning Graduate School of Management, Rutgers University, University Heights, 180 University Avenue, Newark, New Jersey 07102-1895, USASearch for more papers by this author First published: 07 March 2003 https://doi.org/10.1111/j.1468-5965.1996.tb00593.xCitations: 35Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat Citing Literature Volume35, Issue2June 1997Pages 189-223 RelatedInformation

Foreign direct investment in japan and the united states: A comparative analysis

In 1970, the stock of foreign direct investment (FDI) in the U.S. ($65.5 bn) was considerably less than that in Japan in 1990 ($149.0 bn). (Obviously in real terms, the difference is much less.) Yet, at that time, no one asked the question, “Why is FDI in the U.S. so low?” as they do now of FDI in Japan. Since 1970, the United States has become the leading recipient on inbound FDI, and the ratio of her outward / inward direct investment stock has fallen from 4.92 (in 1973) to 1.05 (in 1990). This paper will speculate on whether Japan will follow the United States's investment path in the 1990s. In 1970, the United States was about to lose her economic hegemony, and one result was a fall both in the competitive advantages of her firms and a devaluation of the U.S. dollar. Both factors, together with the growth of strategic asset—acquiring FDI in the 1980s, led to more inbound FDI. Will these same events occur in Japan? Will Japanese firms—particularly in FDI-intensive sectors—lose some of their cutting edge in competitiveness? Will the yen weaken? Will there be an increase in strategic asset-seeking FDI in Japan? Or are there some peculiarly Japanese factors which will limit both the ability and willingness of foreign firms to invest in Japan, and instead, insofar as they will penetrate the Japanese market at all, they will do so by exports and by nonequity collaborative agreements, rather than by FDI. This paper will argue (with supporting evidence) that while it is likely there will be a substantial increase in FDI in Japan in the latter 1990s, the rate of increase is unlikely to be as great as that of FDI in the United States in the 1970s and 1980s.

The European Internal Market Programme and Inbound Foreign Direct Investment

The European Internal Market Programme and Inbound Foreign Direct Investment

An Issue-Area Approach to the Analysis of MNE-Government Relations

This article presents an issue-area approach to the analysis of relations between multinational enterprises and governments. The concept of issue-areas is drawn from a body of political science literature that has been neglected in the literature of international business. The central theme of the analysis is that business-government relations vary systematically across issue-areas in their interactions and outcomes. An issue-area typology from the political science literature is applied to MNE-government relations concerning inbound foreign direct investment in the United States. The article adopts a heuristic approach, as is appropriate in this first stage in the development of an issue-area theory of MNE-government relations.