Types Of Foreign Direct Investment Research Articles

Assessment of Impacts of Inward and Outward FDIs on Environmental Protection in Vietnam

Considering two theories of Halo and Haven and annual data from 1994 to 2021 for the country of Vietnam, this paper has tried to consider two types of foreign direct investment (to Vietnam from abroad and from Vietnam to abroad) to study the impact factor of investment on carbon dioxide emissions in this country. The significant findings reveal that FDI (Foreign Direct Investment), both inward and outward, is an efficient factor in mitigating carbon emissions in the short term in Vietnam. The enhancements in the inward and outward flows of FDI in Vietnam will likely lead to a reduction in carbon emission increase which is in line with the environmental protection policy. In addition, it confirms the Halo pollution hypothesis in Vietnam, meaning that the Vietnamese government can mitigate CO2 emissions by improving FDI flows (both inward and outward).

Analysis of Economic Activity of Foreign Direct Investors in Latvia

The aim of this article is to investigate the activity of foreign direct investors in Latvia and find out the main source of financing for foreign investors - new investments or reinvested earnings. To achieve the set goal, the methodology of the Sixth Edition of the International Monetary Fund's Balance of Payments and International Investment Position Manual was used to define the types of foreign direct investment (FDI). This methodology was adapted to Latvian data. At the request of the author, Lursoft IT Ltd selected business data on all registered companies with foreign capital in Latvia since 2005 and aggregate data were used in the analysis. Foreign direct investment in Latvia flows mainly in the form of reinvested earnings, due to the profit earned from operating activities in Latvia. While new investments or greenfield investments in equity is lower compared to the amount of reinvested earnings.

해외직접투자와 기술수출에 관한 연구

The paper puts an in-depth study on Korea's technology trade competitiveness with Vietnam, Korea's No. 1 foreign direct investment and the No.1 technology trade surplus country. In addition, it investigates the impact on technology exports according to the type of investment and the purpose of investment in Vietnam when making foreign direct investments. The trade specialization index was used as an analysis tool to analyze the technology competitiveness of specific industries, and multiple regression analysis was applied to examine the causal relationship between foreign direct investment and technology exports by its type and purpose.
 Firstly, a result of the analysis of the trade specialization index reveals that Korea's technology competitiveness with Vietnam was high across all industry sectors. Still, the technological competitiveness of the apparel, accessories, and fur industries is weakening every year.
 Also, Korea's technological competitiveness with Vietnam continues to decline in non-metallic minerals and basic etals from the material industry, which is the basis for high-tech sectors such as the semiconductor industry. On the other hand, a result of regression analysis suggests that the technology exports from Korea have increased in the form of joint investment and decreased when Korean companies invested with the aim of cost reduction when entering the Vietnamese market.
 This study identifies Korea's strong technology competitiveness with Vietnam in each specific industry, but the competitiveness has been weakening in some industries like apparel and material industries. It is also significant in that the impact on domestic technology exports varies depending on the purpose and type of foreign direct investment in Vietnam. It affects Korea's technology exports accordingly.

FDI, liquidity, and political uncertainty: A global analysis

AbstractUncertainty incentivizes investors to wait-and-see and to hold back their investments. This paper investigates whether more liquid types of foreign direct investment (FDI) are affected more by political uncertainty than less liquid ones. Drawing from the real options theory, we develop hypotheses on the sensitivity of different types of FDI. We utilize descriptive statistics and a simple estimation approach to gauge the liquidity of quarterly equity investments, reinvested earnings, and intra-company debt. Then, we deploy election data and the World Uncertainty Index to examine how the three FDI subtypes respond to high political uncertainty. In line with the real options theory, reinvested earnings significantly drop in an election quarter. However, this only holds for high-income countries. In lower-middle- and low-income countries, electoral uncertainty negatively affects equity investments, with higher institutional quality moderating the effect. In particular, the number of veto players and the government’s credibility decrease the effect of uncertainty on FDI.

Structural Analysis of Inward Foreign Direct Investment in Latvia

The aim of this article is to investigate the activity of foreign direct investors in Latvia and find out what is the main source of financing for foreign investors – new investments or reinvested earnings.In order to achieve the set goal and test the hypothesis, the methodology of Sixth Edition of the International Monetary Fund’s Balance of Payments and International Investment Position Manual was used to define the types of foreign direct investment. This methodology was adapted to Latvian data. At the request of the author, Ltd Lursoft IT selected business data on all registered companies with foreign capital in Latvia since 2005 and aggregate data were used in the analysis.Foreign direct investment in Latvia flows mainly in the form of reinvested earnings, due to the profit earned from operating activities in Latvia. While new investments or greenfield investments in equity is lower compared to the amount of reinvested earnings. The results of the study reflect the business results of foreign direct investors in Latvia, as well as their actions in relation to the earned profit from operating activities. These results could be used by the Ministry of Economics of the Republic of Latvia and the Investment and Development Agency of Latvia to improve Latvia’s investment environment and im¬plement a more effective investment attraction strategy.

The Effects of Policy Uncertainty on Different Types of FDI - a Global Analysis

Uncertainty incentivizes investors to wait-and-see and to hold back their investments. This paper investigates whether more liquid types of foreign direct investment are more affected by policy uncertainty than less liquid ones. Utilizing election data and the newly developed World Uncertainty Index, we examine how quarterly equity flows, reinvested earnings, and intra-company debt flows develop in times of high political uncertainty. In line with the real options theory, we find that reinvested earnings significantly drop in an election quarter. However, this only holds for high-income countries. In lower-middle- and low-income countries, electoral uncertainty negatively affects equity investments.

An Empirical Study on the Effect of Oversea Investment Insurance of Korea

Purpose : The purpose of this study is to empirically examine the effect of Oversea Investment Insurance on Korean foreign direct investment in the 2000s. Research design, data, methodology : For this purpose, the study establishes an econometric model in the framework of theoretical equation for determinants of direct investment. Next, panel data estimations with pooled, fixed effects and random effects models have been conducted by using a panel data set for Korean Foreign Direct Investment to 17 partner countries from 1995 to 2018. Results : The estimation results demonstrate the evidence for the influence of GDP, per capita GDP, trade, and patent in its partner countries on flows of Korea’s foreign direct investment including green field and MA in particular for the green field investment of Korea. These results imply that the effect of the insurance is notable but it differs across the types of investment such as green filed and M&A. Conclusions : The results in the analysis suggest that the policy authority consider the possibility of the difference in the effect across the types of foreign direct investment, and implement more sophisticated management strategies according to the different types for oversea investment insurance in Korea.

The dynamic relationship between greenfield investments, cross-border M&As, domestic investment and economic growth in Vietnam

This paper investigates the dynamic linkages between different types of foreign direct investment (FDI), domestic investment and economic growth in Vietnam. We decompose the aggregated FDI level into its two major components: greenfield investments, and cross-border mergers and acquisitions (M&As). The empirical results reveal that greenfield investments and cross-border M&As exhibit different impacts on economic growth. While greenfield investments appear to complement domestic investment, which subsequently promotes long-run economic growth, cross-border M&As exert a significant crowd-out effect and subsequently impede growth in both the short- and the long-run. These results provide important implications for policies to attract FDI in order to stimulate sustainable growth.

Foreign production and the environment: does the type of FDI matter?

ABSTRACT We examine the relationship between foreign ownership and the environmental performance of firms. We make a distinction between export-oriented and horizontal multinationals as they have different motivations and firm characteristics. Horizontal foreign direct investment substitutes for exports when trade costs are high, while export-oriented vertical multinationals geographically separate the stages of production primarily to exploit production cost differences across countries. Theoretically, it is not clear which type of foreign direct investment is dirtier. In this paper, we use microdata from Chile and find that export-oriented foreign firms have lower emission intensity than horizontal affiliates and domestic firms.

How IFRS influence the relationship between the types of FDI and economic growth

PurposeThe purpose of this paper is to examine the relationships between International Financial Reporting Standards (IFRS), types of foreign direct investment (FDI) – greenfield investments (GFIs) and mergers and acquisitions (M&As) – and economic growth in 49 African countries between 2003 and 2017.Design/methodology/approachIn the study, panel data fixed effects and generalized method of moments estimation techniques are used in order to test the hypotheses.FindingsUsing country-level data obtained from the World Development Indicators, The United Nations Conference on Trade and Development and World Governance Indicators websites, the authors find that IFRS and the types of FDI are significantly related to economic growth. Moreover, our results provide evidence that the effect of GFIs and M&As on growth is influenced by IFRS positively.Research limitations/implicationsWith a handful of exceptions, most African countries do not have active stock markets. Therefore, the authors were unable to determine the effect of capital markets on growth.Practical implicationsFDI has the potential to contribute to economic growth and quality of life. Our findings suggest that policymakers should create incentives for attracting FDI and effective enforcement of IFRS in order to unleash the benefits of FDI on their economies.Originality/valueThe study provides important insights into the effects of types of FDI on the economic growth of African countries and into the role that IFRS play on this relationship.

Modern Trends in Chinese Foreign Direct Investment in Africa: An OLI Approach

This study evaluates the subtle differences that the various types of foreign direct investment (FDI) of China in Africa offers, as revealed by the data, using the ‘Ownership, Location and Internalisation Advantages’ OLI approach. Chinese FDI is analysed using source country comparisons, sectoral comparisons and an investigation of Chinese fdi practices. Data visualisation techniques and analyses infer similarities and differences between Chinese and other investors in Africa. These alternativ emethods are driven by the nature of the available data and its resulting statistical possibilities. The significance of this study is that it disambiguates the available data and compares along theory. Many stylised facts are assumed concerning Chinese FDI; this study, however, quantifies and tests these assumptions. The results show that China follows investment patterns of other investors, although heavily skewed towards oil, coal and gas, and other resource sectors. China otherwise tends to invest in medium growth, diversified economies, predominantly Nigeria and Egypt; except in Ethiopia where investment in communications dominates;Cameroon where chemicals dominate; Angola where investments in real estate outperform investment in the coal, oil and gas; and in South Africa and Tanzania that have a more even spread between sectors compared to the rest of the continent.

Size of foreign direct investment and firm characteristics

This paper focuses on the role of classifying types of foreign direct investment (FDI) for analysing the determinants of cross-border investment relationships. We base our investigation on a newly established firm-level data set of German multinational firms and their affiliates in the Czech Republic that allows various categorisations into vertical foreign direct investment (VFDI) and horizontal foreign direct investment (HFDI). Apart from data for conventional approaches to classifying FDI types, the surveyed information contained herein also includes a detailed self-assessment of the firms with respect to investment motives, and specifications on intra-firm trade and the flow of intermediate inputs. In order to correct for sample selection, we apply a two-step Heckman procedure by comparing multinational firms that have an affiliate in the Czech Republic to companies without investment abroad. The results for the direct measures of FDI types confirm theoretical expectations and previous empirical literature and stand in marked contrast to the outcome for indirect measurement concepts. Our finding leads us to the conclusion that one should be more cautious in interpreting differences between vertical and horizontal FDI when using approximative classification concepts.

Institutions as a Mediator of the Effect of Crossborder Mergers & Acquisitions on Domestic Investment

In this article we analyse the impact of the interaction between cross-border mergers and acquisitions and the quality of the institutional setting on domestic investment using panel data for 22 European transition countries from 2000 to 2014. We investigate whether the progress and durability of institutional reforms have a crucial influence on the economic performance of cross-border mergers and acquisitions in transition countries. Our empirical findings indicate that contemporaneous cross-border mergers and acquisitions have a crowding-out effect on domestic investment in the year of merger or acquisition, but the influence of their lagged level has a strong crowding-in effect one year later. We find that the overall quality of the institutional setting and the rule of law negatively and significantly affect the relation between this type of foreign direct investment and domestic investment, both in the short and long run. Political stability exhibits a positive and significant impact on domestic investment in the current period and over time.

Size of foreign direct investment and firm characteristics

This paper focuses on the role of classifying types of foreign direct investment (FDI) for analysing the determinants of cross-border investment relationships. We base our investigation on a newly established firm-level data set of German multinational firms and their affiliates in the Czech Republic that allows various categorisations into vertical foreign direct investment (VFDI) and horizontal foreign direct investment (HFDI). Apart from data for conventional approaches to classifying FDI types, the surveyed information contained herein also includes a detailed self-assessment of the firms with respect to investment motives, and specifications on intra-firm trade and the flow of intermediate inputs. In order to correct for sample selection, we apply a two-step Heckman procedure by comparing multinational firms that have an affiliate in the Czech Republic to companies without investment abroad. The results for the direct measures of FDI types confirm theoretical expectations and previous empirical literature and stand in marked contrast to the outcome for indirect measurement concepts. Our finding leads us to the conclusion that one should be more cautious in interpreting differences between vertical and horizontal FDI when using approximative classification concepts.

Book Reviews

R.K. Pattnaik of SP Jain Institute of Management and Research reviews “Managing the Macroeconomy: Monetary and Exchange Rate Issues in India,” by Ramkishen S. Rajan and Venkataramana Yanamandra. The Econlit abstract of this book begins: “Provides an empirical assessment of some of India's crucial policy challenges regarding its monetary and external sector management. Discusses a macroeconomic overview of the Indian economy; the effectiveness of monetary policy in India--the interest rate pass-through channel; understanding exchange rate and reserve management in India; the impact of exchange rate pass-through on inflation in India; rupee movements and India's trade balance--exploring the existence of a J-curve; and external financing in India--sources and types of foreign direct investment.”

Categorizing the Liability of Foreignness: Ownership, Location, and Internalization‐Specific Dimensions

Plain language summaryThis study explains the different types of additional costs faced by multinational firms when they invest abroad. We identify product adaptation cost, discrimination cost, governance cost, and appropriation hazard as important sources of the difficulties that multinationals face. We then link each of these costs to different dimensions of cross‐national distance, including economic, cultural, demographic, political, and administrative distance. Finally, we show that the importance of these different distance dimensions differ when multinationals invest abroad for different reasons including market seeking, efficiency seeking, knowledge seeking, and natural resource seeking.Technical summaryThis study bridges the literature on the liability of foreignness (LoF) and cross‐national distance. Following the ownership‐location‐internalization paradigm, we categorize the LoF into three dimensions: ownership‐specific LoF, location‐specific LoF, and internalization‐specific LoF, each of which reduces a specific advantage of the multinational firm. We first define the three dimensions of the LoF and then argue that each dimension is related to different types of costs. We further explain that different types of costs are associated with different dimensions of cross‐national distance, and firms face different types of the LoF and associated costs when they conduct different types of foreign direct investment. We test these hypotheses in the context of Chinese listed firms investing abroad, finding support for most of the predictions. Copyright © 2016 Strategic Management Society

The effect of exchange rate fluctuation on intra-industry reallocation in a firm heterogeneity model with trade and foreign direct investment

Abstract This paper presents a North-South firm-heterogeneity model with trade and two types of foreign direct investment (FDI): vertical and horizontal. We examine the short-run effect of exchange rate changes on intra-industry reallocation. Home currency depreciation concentrates intra-industry resources on export firms and away from domestic and FDI firms. The effect of the depreciation on industry-wide productivity is uncertain in a purely theoretical analysis, but the robust estimation in a fixed effects model using firm-level data (2010–2015) from the Japanese manufacturing industry (general machinery, electric machinery, and transportation equipment) suggests that home currency (yen) depreciation raises industry-wide productivity.

What is “strategic asset seeking FDI”?

Purpose – The purpose of this paper is to shed more light on the concept of “strategic asset-seeking FDI”, which is frequently used in discussion of emerging economy multinational enterprises (MNEs), but it is challenged by some scholars. The author argues that he needs this category because an important type of foreign direct investment (FDI) is not captured by the other motives identified by John Dunning, namely, market-, efficiency- and natural-resource-seeking FDI. Design/methodology/approach – The author illustrates the phenomenon of strategic asset-seeking FDI with case examples that form the starting point for his theoretical arguments. Findings – Some FDI is undertaken explicitly with the aim to use assets acquired abroad to enhance the operations of the investor in other markets, including, notably, the investors’ home market. This contribution to capability-building processes of the MNE, indeed, constitutes an important and distinct type of investment motive. Originality/value – The author concluded that Dunning’s typology remains a powerful tool to analyze contemporary business strategies, but it suggests refining the definition of the categories.

Investment-driven industrial localisation in Calabar, free trade zone and environs, south-eastern/southsouth, Nigeria: Evidence on recent sub-national regional economic diversification

The type of foreign direct investment (FDI) mostly received by Nigeria in the past decades has formed one of the central points of the discussion of the nature of investment in development in this country acknowledged as Africa's second largest economy. The way FDI receipt varies by size and type by sub-national regions (especially the 36 states, Federal Capital Territory in Abuja and the 774 Local Government Areas) forming Nigeria's federation has so been poorly addressed. However, scholars recently reported on the receipt of FDI in Cross River State following the state government's policy that is being praised by Nigeria's federal government agencies and international governmental organizations -including United Nations Systems in Nigeria, among others. The praises recognize Cross River State Government's practice of good governance and cost-effective resource management as it confronts challenges including declining funds hitherto allocated from the pooled federation account. The objective of this article is to is to contribute towards understanding recent foreign direct investment in Cross River State. This article follows on theoretical perspectives and background recently reported by presenting findings of an empirical case study of recent and ongoing increasing investments in the Calabar Free Trade Zone (CFTZ) city of Cross River State (Nigeria). We apply methods of descriptive case study to inform on the increasing commitment of foreign investments towards manufacturing engagement in Calabar urban region/environs. We present Calabar region's previous/recent development challenges and provide some details of the recent increasing foreign investments in the Calabar FTZ city, before analyzing and synthesizing the recent increasing foreign investments in the Calabar FTZ city. It is demonstrated that the recent economic dynamics would engender a set of socio-economic, spatial and ecological/environmental responses and explain their implications to Calabar's overall and manifold governance dimensions and status. We recommend that further study could focus on showing how foreign investment in manufacturing and recent dynamics in the global economy (e.g. financial-economic crises) and sub-national investment promotion have combined to make possible the recent increases in investment manufacturing in the Calabar region..

The Dynamic Linkages between Foreign Direct Investment and Domestic Investment in ECOWAS Countries: A Panel Cointegration Analysis

Abstract: This paper examines the crowding out or crowding in effect of foreign direct investment inflow on domestic investment in Africa. Data for the period 1970–2008 were extracted from the UN statistical online database and the World Development Indicator 2009 online database and the study employed a recent panel cointegration estimation technique. The study revealed that foreign direct investment inflow crowds out domestic investment in the ECOWAS region. The study therefore recommends that policy makers in the ECOWAS countries focus on promotional resources to attract some types of foreign direct investment and regulate others. Policies should also be directed at putting in place a better targeted approach to screen foreign direct investment applications to ascertain their productive base before allowing them.