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Foreign Direct Investment and Employment: Home Country Experience in the United States And Sweden
Abstract
The authors compare the relation between foreign affiliate production and parent employment in U.S. manufacturing multinationals with that in Swedish firms. U.S. multinationals appear to have allocated some of their more labor-intensive operations selling in world markets to affiliates in developing countries, reducing the labor intensity in their home production. Swedish multinationals produce relatively little in developing countries and most of that has been for sale within host countries with import-substituting trade regimes. The great majority of Swedish affiliate production is in high-income countries, the United States and Europe, and is associated with more employment, particularly blue-collar employment, in the parent companies. The small Swedish-owned production that does take place in developing countries is also associated with more white-collar employment at home. The effects on white-collar employment within the Swedish firms have grown smaller and weaker over time. Copyright 1997 by Royal Economic Society.
... FDI also benefits home countries. For instance, Blomstrom and Fors (1997) found that substantial FDI outflow to other countries helps preserve unskilled jobs at home, because skilled intensive work-like R&D is conducted abroad. ...
... Thus, relocation of firms overseas scales down future investment, which reduces home production. This is more likely to breed unemployment at home (Frank and Freeman, 2014;Blomstrom and Fors, 1997). In addition, several research hypothesized that FDI could displace local investment, reducing the long-term competitiveness of domestic industries and widening the income gap between low-and high-skilled employees in receiving nations (Strat et al., 2015;Agosin and Machado, 2005). ...
... Financial spillover occurs when FDI in host countries reduces production costs or increases the profit/revenue of indigenous enterprises (Gorg, 2005). Market-access spillover occurs when FDI in host nations allows domestic enterprises to easily access global markets (Blomstrom and Fors, 1997;Blomström and Kokko, 1998). Productivity spillover occurs when FDI increases worker productivity in host countries (Aitken and Harrison, 1999). ...
This paper uses time series data covering the period from 1980 to 2019 to study the role of institutional quality in influencing the impact of foreign direct investment (FDI) on manufacturing sector growth and explore the impact of FDI on manufacturing sector growth in Ghana. We used the bound test approach to cointegration within the autoregressive lags model (ARDL) framework as an estimation strategy. The results of the ARDL indicate that FDI influences manufacturing sector growth negatively. At the same time, the interaction of FDI with institutional quality exerts a positive and significant effect on manufacturing sector growth. These results show that the quality of institutions is needed to complement the inflow of FDI to boost the growth of the manufacturing sector. Hence, policy interventions aimed at improving the manufacturing sector should target improving the quality of institutions through minimizing corruption among state and private institutions.
... Lipsey and Weiss 1981;Lipsey 1994;Graham 1996;Barrell and Pain 1997). Blomström et al. (1997), Agarwal (1996 and Andersen and Hainaut (1998) provide excellent surveys. One way to approach the problem is to derive substitution elasticities (relative wages) between employees in parent firms and their affiliates. ...
... Empirically, if different trade linkages between parent firms and affiliates exist for direct and indirect FDI, their effect on domestic employment will differ as well. For example Blomström et al. (1997) argue, that rivalry for markets is one of the main reasons for a positive relationship between foreign production and domestic employment (p. 1798), which provides one argument to distinguish market-oriented from efficiency-oriented FDI. ...
... Next, we look at the impact of affiliate sales on domestic employment. For that purpose we have chosen a simple descriptive model (see Blomström et al., 1997). Such an approach tries to evaluate the relationship between foreign sales and domestic employment for a given level of parent sales. ...
One of the specific characteristics of Austrian Foreign Direct Investment (FDI) abroad is that a large part is carried out by firms, which themselves are affiliates of foreign Multinational Enterprises (MNEs). Such investment is termed indirect FDI in order to distinguish it from direct FDI, made by Austrian-owned firms. The objective of this paper is to analyse, whether the relatively better domestic employment performance of domestic firms (direct FDI) compared to foreign-owned firms (indirect FDI) can be linked to FDI abroad. Based on an analysis of the sales and trade structure of a sample of Austrian investors in Central and East European Countries (CEECs), this paper tests the hypothesis that these two groups of investors have different motives to invest in CEECs and therefore their activities in CEECs differ by type (sales affiliate, production abroad) and consequently the employment effects at home. Regression results confirm that direct FDI are more strongly determined by labour costs and exhibit an employment pattern related to a deeper international division of labour (including production), while indirect FDI is based relatively more on market seeking investment. Empirical results also confirm that employment effects at home differ. The positive (negative) effect of one additional unit of parent (affiliate) sales on domestic employment for indirect FDI compared to direct FDI is larger (smaller). The-despite this empirical fact-relatively better domestic employment performance of direct FDI is explained by their superior sales performance, resulting from restructuring their international division of labour.
... For example, China, despite its high tax (according to the World Development Indicators, China's total tax rate of commercial profits was 66.5% in 2017), still receives the most FDI in the region. Amongst other things, skilled and cheap labor is an important factor that attracts foreign investments in the Asia-Pacific region (Blomström et al., 1997;Cheng and Kwan, 2000;Dees, 1998;Lucas, 1993;Quazi and Mahmud, 2006;Sahoo, 2006). Countries with better economic conditions such as GDP per capita, infrastructure connectivity, a larger size of public goods provision, may attract more investments (Busse and Hefeker, 2007;Billington, 1999;Chakrabarti, 2001;Cheng and Kwan, 2000;Cole et al., 2009;Garrett, 1995;Habib and Zurawicki, 2002;Ketkar et al., 2005;Quazi, 2014;Quinn, 1997;Yuan et al., 2010). ...
... Skilled and cheap labor. Skilled labor is an important consideration for many foreign investors, particularly those in advanced industries (Blomström et al., 1997). Therefore, we include skilled labor as an explanatory variable. ...
Purpose - The purpose of this study is to investigate how a country’s competitive tax policy influences its inward foreign direct investments (FDI) in the Asia-Pacific region, even when given particular constraints (e.g., population, public governance, skilled labor, and so on) exist.
Design/methodology/approach - The paper uses the system GMM estimation approach to test the hypothesis. Data on FDI, corporate income tax, and various confounding factors were drawn from Ernst and Young’s worldwide corporate tax guide, the World Bank, and other sources to create a panel of 28 economies over the period 2000-2016.
Findings - The present research confirms the negative association between corporate income tax (CIT) and FDI inflows. The effects of other confounding factors on FDI net inflows are also supported (e.g., connectivity, GDP per capita, population, skilled labor, and trade openness). Our results support the argument that foreign investments may be more sensitive to CIT. Therefore, CIT is an effective indicator to observe international tax competition.
Originality/value - The present research uses rich data on statutory CIT and other economic and public governance factors to investigate the relationship between tax competition and FDI inflows in the Asia-Pacific region. The findings add important supplements to the nuanced understanding of the political-economic dynamics in this region, especially when cut-throat tax competition, trade tensions, and stagnant economic growth have been key challenges for global economies.
... For example, China, despite its high tax (according to the World Development Indicators, China's total tax rate of commercial profits was 66.5% in 2017), still receives the most FDI in the region. Amongst other things, skilled and cheap labor is an important factor that attracts foreign investments in the Asia-Pacific region (Blomström et al., 1997;Cheng and Kwan, 2000;Dees, 1998;Lucas, 1993;Quazi and Mahmud, 2006;Sahoo, 2006). Countries with better economic conditions such as GDP per capita, infrastructure connectivity, a larger size of public goods provision, may attract more investments (Busse and Hefeker, 2007;Billington, 1999;Chakrabarti, 2001;Cheng and Kwan, 2000;Cole et al., 2009;Garrett, 1995;Habib and Zurawicki, 2002;Ketkar et al., 2005;Quazi, 2014;Quinn, 1997;Yuan et al., 2010). ...
... Skilled and cheap labor. Skilled labor is an important consideration for many foreign investors, particularly those in advanced industries (Blomström et al., 1997). Therefore, we include skilled labor as an explanatory variable. ...
Purpose-The purpose of this study is to investigate how a country's competitive tax policy influences its inward foreign direct investments (FDI) in the Asia-Pacific region, even when given particular constraints (e.g., population, public governance, skilled labor, and so on) exist.
Design/methodology/approach-The paper uses the system GMM estimation approach to test the hypothesis. Data on FDI, corporate income tax, and various confounding factors were drawn from Ernst and Young's worldwide corporate tax guide, the World Bank, and other sources to create a panel of 28 economies over the period 2000-2016.
Findings-The present research confirms the negative association between corporate income tax (CIT) and FDI inflows. The effects of other confounding factors on FDI net inflows are also supported (e.g., connectivity, GDP per capita, population, skilled labor, and trade openness). Our results support the argument that foreign investments may be more sensitive to CIT. Therefore, CIT is an effective indicator to observe international tax competition.
Originality/value-The present research uses rich data on statutory CIT and other economic and public governance factors to investigate the relationship between tax competition and FDI inflows in the Asia-Pacific region. The findings add important supplements to the nuanced understanding of the political-economic dynamics in this region, especially when cut-throat tax competition, trade tensions, and stagnant economic growth have been key challenges for global economies.
... In the case of developed countries, although the empirical literature is not conclusive, evidence suggests that whilst OFDI directed to less developed countries is associated with increases in the intensity of skilled labour at home, the effects on skills when OFDI flows to similarly developed countries is rather mixed (Blomström et al., 1997;Braconier & Ekholm, 2000;Brainard & Riker, 1997;Fors & Kokko, 2001;Lipsey, 1999). Nonetheless, since OFDI has been generally thought of as an outcome of economic development (Dunning & Narula, 1996), very little attention has been paid to the OFDI home effects when the investing multinational enterprises are from less advanced economies (Knoerich, 2017). ...
... Whereas most findings suggest that OFDI directed to less developed countries is associated with increases in the intensity of skilled labour at home -at the expense of the unskilled-the evidence on home skill effects is rather mixed when OFDI flows to similarly developed countries (Blomström et al., 1997;Braconier & Ekholm, 2000;Brainard & Riker, 1997;Fors & Kokko, 2001;Lipsey, 1999). ...
Economies around the globe are increasingly interconnected. Foreign Direct Investment (FDI) has become one of the main drivers of economic interdependence among regions across the world. FDI as a flow of capital across international boundaries is bound to have distinctive effects on the human capital accumulation process in both home and host economies, with important consequences for economic development. The aim of this thesis is to improve our understanding on the geography of two interrelated economic phenomena for Mexican subnational regions: FDI and Human Capital. Mexico has been an important recipient of inward FDI, but in the last two decades the services sector has been gaining importance over manufacturing, while the country has been increasingly sending flows of outward FDI to the rest of the world. Concurrently, wage inequalities persist, educational outcomes are lagging behind, and demand for skilled workers is decreasing. These changing trends and shifting balance have important implications for wages and the incentives to develop human capital at the local and regional scale in Mexico. Moreover, the aforementioned changes in FDI patterns, wages and human capital have occurred in a country where territorial disparities are still commonplace. Against this background, these papers explore several relationships between FDI and three dimensions of human capital accumulation, namely; wages, educational attainment, and skills. The first paper examines the effect of inward FDI on the wage gap between skilled and unskilled workers. Departing from these findings, the second paper analyses the effect of higher wages offered by multinationals on youth educational choices. The third paper explores the regional determinants of the recent internationalisation of Mexican firms, with particular attention to skills, productivity and innovation. Finally, the fourth paper explores the effects of outward FDI on the relative demand for skilled and unskilled workers. In order to empirically investigate the aforementioned relationships, I deploy a wide array of econometric techniques that allow me to provide quantitative estimates of the associations at hand. Particular attention is placed on endogeneity concerns that may lead to statistical biases on the evidence provided. By adopting a regional- and industry-level perspective, the present thesis hopes to shed some light on the effects of bidirectional FDI on various Human Capital dimensions. Policy implications drawn from the findings herein, are of paramount importance. Mexico has taken significant strides towards development; however, it still has a sizeable untapped economic potential. This and other empirical evidence should be duly considered if Mexico is to escape the middle-income trap.
... Therefore, FDI does not allow multinationals to use only their specific advantages. It also allows the central country to maintain its market share despite negative developments (Blomström, Fors & Lipsey, 1997). ...
The main aim of this study was to investigate and estimate the impact of foreign direct investment (FDI) on Iraqi economic growth that depending on data from 2004 to 2019. We determined Gross domestic product (GDP), an alternative to economic growth as a dependent variable. FDI inflows and Oil Revenue are independent variables of this study obtained from World Bank various database resources.
According to this research, the low-level FDI to GDP ratio for our study period is just 1.12% in 2012, a very modest ratio. FDI inflows grew dramatically with the passage of the Investment Law of 2006. In Iraq's economy, the oil and gas industry contributes the most to the government's budget.
In addition, numerous tests such as unit root are used to evaluate GDP, FDI, and Oil Revenue, which are all stationary at the first difference and significant at 5%. The Johansen Cointegration tests were performed to examine the relationship between GDP, FDI, and Oil Revenue. We found that all variables are cointegrated, with a P-Value of 0.0001, indicating that the variables have a long-run relationship. Another finding according to least-squares revealed that the prob f-statistic 0.002516 was significant at 5% or lower, indicating that FDI and oil revenue have a positive impact on economic growth.
... This is because foreign production requires more employees in headquarters activities such as R&D and supervision (Lipsey 1994). However in contrast, in the case of Swedish multinationals, Blomstrom et al. (1997) claimed that FDI will preserve unskilled jobs at home when more skill-intensive activities are allocated to the foreign country. In addition to the two opposing arguments mentioned above, Chen and Ku (2000) discovers that FDI outflow among Taiwan manufacturers to be negligible to employment at home country. ...
This study reviews the human resource management practices of food and beverage services. The performance is measured by the turnover rate for managerial and non-managerial employees, labor productivity, and its return on assets. This paper aims to review existing literature on HRM practices in the F&B departments of hotels, analyze the impacts of the framework FOR HRM practices. This study discusses the HRM practices model, and its application to hotel industry. The conceptual model suggests applications of the HRM practices in the F&B department and encourages hotels to improve its management to better satisfy their employees.
... Most of the literature examining the impact of foreign investment activity has typically focused on firm-and country-level analyses (Blomström et al. 1997;Masso et al. 2008;Elia et al. 2009;Clegg et al. 2016;Tang et al. 2020) while only limited attention has been paid to region-specific effects that result from internationalization (McCann & Mudambi 2005;Li M. et al. 2016;Chen 2018;Bathelt & Buchholz 2019). A significant contribution of this paper is therefore the analysis of home-region effects of OFDIs at the level of city-regions. ...
While outward foreign direct investments (OFDIs) shift resources from a home economy to foreign destinations, increased market and resource access as well as technological and knowledge effects in return have positive impacts on the home region. Such effects may be especially important in emerging contexts, such as that of China. Analyzing data of 285 Chinese city-regions, this paper investigates the impact of OFDIs on home-region income. We show that foreign investment activity positively and significantly impacts income levels in the home region, with differentiated effects depending on the knowledge characteristics of investments and regional absorptive capacity.
... Wheeler and Mody 1992;Belderbos 1992;Blonigen et al. 2007;Baltagi et al. 2007;Aw and Lee 2008;Yeaple 2009;Chen and Moore 2010) the effects of FDI on trade (e.g. Lipsey and Weiss 1984;Blomström et al. 1997;Belderbos and Sleuwaegen 1998;Head and Ries 2001;Hanson et al. 2005), the consequences of multinational activity for domestic wages and employment (e.g. Feenstra and Hanson 1996;Slaughter 2000;Head and Ries 2002;Budd et al. 2005;Konings and Murphy 2006;Barba Navaretti et al. 2003), and (technology) spillovers from foreign direct investments (e.g. ...
This paper provides an alternative perspective on the firm-level empirical analysis of the relation between foreign ownership and capital demand adjustment in host countries. The author estimates a dynamic structural model of investment on a sample of 4672 Belgian firms for the period 2003-2010, permitting him to distinguish the ‘ownership status’ of firms. He considers a dynamic discrete choice model of a general specification of adjustment costs including convex and non-convex components. The author uses the method of simulated moments in order to estimate the structural parameters. His results indicate that multinationals’ affiliates face lower capital adjustment costs than national firms.
... Our findings have implications for policy makers trying to avoid FDI's negative influence on home country employment, referred to as 'brain drain' or 'hollowing out' effects (Blomstrom, Fors, & Lipsey, 1997;Huijie, 2018;Lipsey, 1995). While not as frequently discussed, expatriate staffing can also represent a form of industrial hollowing out, with the consequence that less managerial experience is accumulated within the local population. ...
Institutional differences between countries influence strategic choices and performance of international businesses, but the unintended effects of legal institutions on firm legitimacy have received less attention. We argue that, while minority shareholder rights protection in an investment location does not directly protect shareholder interests abroad, the normative and mimetic effects it has on host country managers can mitigate agency problems. Using Japanese FDI established between 1986 and 2013 we find that (a) subsidiaries established in host countries with higher shareholder rights protection employ a smaller proportion of Japanese expatriates, (b) shareholder rights protection enhances a country’s FDI attractiveness, and (c) that the impacts of shareholder rights protection on expatriate ratio and location attractiveness are stronger when firm ownership is concentrated among exchange-listed firms. This research contributes to the literature on institutional difference in international business, in particular by highlighting the value of studying the imprinting effects of regulations.
... Unit root tests3 The detailed data is mentioned in Appendix 1. ...
This paper tries to establish a hypothesis between Net Foreign direct inflows and economic growth in the context of India, analyzing the long-run equilibrium relationships between them. The study is based on time series data in the post-reform period. By taking into consideration of the Johansen’s cointegration test, it has been found that there exists a long-run association between Foreign Direct Investment and economic growth. But the Vector Error Correction Model (V.E.C.M) shows that the error correction term is insignificant, implies that the short-run disequilibrium is not correcting properly. The study suggests that the insignificance occurs due to the presence of a structural break in 2003 and hindrances like unemployment, and corruption, which further affect the long-run equilibrium growth process. Moreover, Granger causality shows a unidirectional causal relationship, its economic growth that determines the flow of FDI in India but not the reverse, which is contrary to common belief.
... If firms invest overseas for "vertical" efficiency reasons, it is generally conjectured that this might reduce employment at home since foreign investment substitutes for domestic investment (e.g. Stevens and Lipsey, 1992;Blomström et al., 1997). "Horizontal" OFDI for market-seeking motives, then again, is considered to increase home employment since foreign investment complements domestic investment (Van Assche, 2020). ...
Does OFDI create or diminish jobs in the home country? We develop a theoretical model to study the relation between OFDI and domestic employment and to evaluate the roles that industrial structure upgrading and the Belt Road Initiative (BRI) play therein. Using Chinese provincial panel data during the period 2005-2018, and applying simultaneous equation modelling techniques to control for endogeneity, we find that China’s OFDI presents a significant positive impact on domestic employment, and the BRI moderates this impact positively. As a mediating factor, industrial structure upgrading suppresses employment, but the overall employment impact of OFDI remains positive. We construct panel simultaneous equation models to control for the endogeneity problem caused by simultaneity, and find that our main findings are still supported.
... Nevertheless, they found that spillover effects from US MNEs were effective in enhancing the share of skilled labour in Chinese manufacturing firms. A study by Blomström, Fors, and Lipsey (1997) shows that the presence of Swedish MNCs in the United States and Sweden prompted a significant effect for skills upgrading on blue-collar employees in parent companies. The effects on white-collar employees within the Swedish firms became noticeably smaller and weaker over time. ...
Objective – The purpose of this study is to investigate both “technology” and “knowledge” effects of foreign direct investment (FDI) on labour productivity in the medium-high manufacturing industries’ classification in Malaysia. Methodology/Technique –This study employs a Seemingly Unrelated Regression (SUR) estimator. Findings – The results conclude that diffusion of knowledge, which increases labour productivity, is greater via “learning effects” as compared to the investor countries’ capital investments in the medium-high manufacturing industries. Novelty –This study expands the body of knowledge about the benefits of FDI spillovers on labour productivity according to specific investor countries, however, are rarely researched particularly in developing countries and at the industry level. Type of Paper: Empirical. JEL Classification: E60, J24 Keywords: Foreign Direct Investment; Labour Productivity; Technology Spillovers; Knowledge Spillovers Reference to this paper should be made as follows: Yunus,N.M; Wahob, N.A. (2021). The Technology and Knowledge Spillover Effects of FDI on Labour Productivity, Journal of Business and Economics Review, 5(4) 51–58. https://doi.org/10.35609/jber.2021.5.4(5)
... The decision to invest financial resources abroad may be associated to a reduction in the likelihood of concurrent investments at home, meaning that foreign operations could substitute for internal investments (e.g. Stevens and Lipsey, 1992;Blomstrom et al., 1997;Desai et al., 2005;Herzer and Schrooten, 2008). The negative consequences linked to this substitution effect are expected to be more pronounced among workers performing job tasks that are abundant in low value-added activities and that are routinised, well understood and codifiable in a set of sequential instructions (e.g. ...
This article explores the role of subnational geography in the analysis of the consequences of Outward Foreign Direct Investment (OFDI) for workers performing different typologies of jobs. We qualify jobs according to their knowledge content, degree of tradability and response to agglomeration economies. While the former two dimensions are key to signal the intensity to OFDI exposure of different typologies of jobs, the latter contributes to explain the unequal spatial distribution of benefits and losses from OFDI in terms of job creation/destruction. We theorise areas that are more severely exposed to OFDI experience job losses in routine occupations, whereas they do not necessarily benefit from job creation in non-routine jobs. To test our hypothesis, we make use of a balanced panel dataset at the local labour market level, exploiting variations in OFDI exposure and in the job composition of local areas. Our findings—robust to numerous checks, including unobserved global and local trends—indicate that job losses concentrate in regions that were more exposed to OFDI based on their initial industry mix, and affect individuals performing mainly routine tasks. In these same areas, however, no significant effects are found when looking at job creation in non-routine occupations.
... The employers, therefore, may feel compelled to invest in training programmes so as to ensure the workers get access to the necessary skills and adopt the management and knowledge effects of FDI. Consistent with the evolutionary theory, FDI inward stock tends to be higher for host-industries with the greatest absorptive capacity (Blomström, Kokko, & Zejan, 1994;Blomström, Fors, & Lipsey, 1997). ...
... Nevertheless, they found that spillover effects from US MNEs were effective in enhancing the share of skilled labour in Chinese manufacturing firms. A study by Blomström, Fors, and Lipsey (1997) shows that the presence of Swedish MNCs in the United States and Sweden prompted a significant effect for skills upgrading on blue-collar employees in parent companies. The effects on white-collar employees within the Swedish firms became noticeably smaller and weaker over time. ...
A plethora of studies have revealed the importance of new knowledge transfer from foreign multinational corporations (MNCs) in encouraging higher labour productivity and sustainable competitive advantages. However, less attention is given to low labour productivity issue despite the presence of FDI, especially in the developing country context. Most of the studies only heavily emphasised on 'technology' effects rather than 'knowledge' effects on the host country as a result of the presence of foreign technology. As Malaysia is one of the major FDI recipients in Southeast Asia, the specific spillover effects of each FDI investor country in Malaysia, need to be studied. With an abundance of MNCs, international technology transfer is considered as an imported mode for technology acquisition in a developing country like Malaysia. However, the benefits of FDI spillovers on labour productivity function in Malaysia remain ambiguous, even when classified according to specific investor countries. Globalisation and liberalisation have seen trade and investment activities booming, thus increasing multilateral relations between Malaysia and other countries regardless of their level of development. Thus, this study may help the Malaysian government to justify the cost that should be invested to attract more FDI inflows towards the manufacturing industries in the short run. Keywords: spillover effects, Foreign Direct Investment, labour productivity, technology spillovers, knowledge spillovers
... There have been a great many studies to determine the employment and wage effects of FDI (see Caves 1996 for a recent survey). For example, Blomstrom, Fors, and Lipsey (1997) find that in the year they studied, 1989, increased sales by U.S. multinational foreign affiliates abroad reduced employment in the U.S. parent multinational, with the impact for employment in MNC investment in less-developed countries being much stronger than for MNC activities in the North. James Burke finds that increased investment abroad by U.S. multinational corporations tends to reduce multinational investment at home for highly indebted U.S. multinationals (Burke 1997). ...
The authors of this book challenge mainstream thinking about the nature of globalization. While not hostile to markets per se, they believe that capitalist market processes, left to operate freely, tend to generate injustice, insecurity, instability, and inefficiency. Taking account of the new realities of globalization, this volume explores an unusually wide range of subjects, including trade integration, multinational corporations, labor markets and migration, international capital flows, macroeconomic and environmental policy, and the central roles of the IMF and World Bank. It proposes alternatives to neo-liberal orthodoxy, developing policy measures that counter the destructive features of markets and promote equality as well as efficiency. The approach in this volume is particularly illuminating for understanding the Asian financial collapse of 1997–98 and similar recent crises. The volume also includes comments on each chapter by a wide range of distinguished economists, producing a lively and often controversial set of interchanges.
... Brainard and Riker (2001) use matched US parent-subsidiary data for 1983-1992 and find small substitution effects between parent and subsidiary employment. Subsidiary employment in both high and low income countries substitute for employment in the US. 2 Blomström, Fors, and Lipsey (1997) find that US MNEs relocate their labour-intensive activities to subsidiaries in developing countries which are not found in the activities of Swedish MNEs. 3 However, Braconier and Ekholm (2000) find some evidence that home country employment in Swedish MNEs is a substitute for employment in subsidiaries in other high-income host countries for the period 1970-1994. Feenstra and Hanson (1999) argue that while outsourcing/offshoring to low income countries may reduce demand for unskilled workers in the west, this activity increases the demand for skilled labour at home, enhanced by any increase in technological capability of the firm. ...
This paper investigates the impact of offshore outsourcing across 5746 European service multinational enterprises (MNEs) on employment at home. We estimate labour demand equations and specifically isolate the global financial crisis (GFC) by undertaking analysis through our longitudinal 19-year panel data, separately for the pre- (1997–2007) and crisis period (2008–2016). We distinguish between offshoring to high and low income countries, as well as between service industry groups. We show that there is some evidence that offshoring by location intensive service firms is associated with employment growth at home during the crisis period, while offshoring in information intensive industries in high income countries is associated with a reduction in employment at home, as firms offshore to be nearer to the client. Overall, our findings suggest that the crisis period has lessened the impact of offshoring service FDI on employment at home.
... Second, FDI has a positive effect on the growth of the formal economy (Romer, 1994;Choe, 2003;Li & Liu, 2005;Long et al., 2018;Mustafa, 2019;Nantharath & Kang, 2019), so that it reduces the size of the shadow economy (La Porta & Shleifer, 2014;Williams, 2008). Third, FDI creates employment (Lall, 1995;Blomström, Fors, & Lipsey, 1997), raises wages (Heyman, Sjholm, & Tingvall, 2007), and improves labor productivity (Le, Duy, & Ngoc, 2019), thus reducing the size of the shadow economy (Boeri & Garibaldi, 2002;Dell'Anno & Solomon, 2008). Nikopour, Habibullah, Schneider, and Law (2009) used the data of 145 countries from 2000-2005; by applying the Generalized Method of Moments (GMM) approach, they conclude that there is bi-directional causality between FDI and the shadow economy. ...
Tax is the main revenue of Government, so fighting tax evasion and sustainable growth have been the primary macroeconomic goals being pursued by every developing country, Vietnam included. The existence and development of the shadow economic sector are synonymous with the national budget losing out. In Vietnam, foreign direct investment projects do not promote economic growth and is also a sector that gives way to tax evasion.The purpose of this study is to investigate the impact of foreign direct investment, the quality of the informal institution on the size of the shadow economy in Vietnam, during the period 1991-2015. By applying the Autoregressive Distributed Lag approach and Toda and Yamamoto test, we found evidence to conclude that the quality of the informal institution harms the size of the shadow economy. The results of the causality test show that there is a unidirectional causality running from the shadow economy and the quality of the informal institution to foreign direct investment attraction in Vietnam. Political solutions need to be implemented carefully to counter the harmful effects of the shadow economy. Policymakers should adopt several economic policies to improve the 'human capital' and drive the shadow economy into the formal economy.
... That is, MNEs need to put mechanisms in place to coordinate foreign investments, which is typically done from their headquarters in the firm"s home country (Meyer & Benito, 2016). Especially if the network is comprised of multiple foreign subsidiaries, such coordination likely requires that more staff is hired at the home headquarters (Blomström, Fors, & Lipsey, 1997). Especially emerging market multinationals seem to have exhibited that behavior. ...
Purpose
This paper aims to use the eclectic paradigm as a broad organizing framework to bring together two somewhat parallel international business (IB) literatures, one on the development effects of multinational enterprise activity and the other on the internationalization of emerging market multinationals (EMNEs). The author does so to better understand how outward foreign investment shapes economic development in firms’ home countries.
Design/methodology/approach
Considering that the characteristics of foreign investment by EMNEs likely differ from that of their developed economy counterparts and that such characteristics may have unique development consequences, the author revisits one of IB’s overarching theories to rethink how ownership, location and internalization advantages take shape and stimulate diverse development outcomes.
Findings
My narrative review and conceptual analysis indicate that the eclectic paradigm is a valuable framework that can be used to shed light on underexplored phenomena and thereby inform important policy debates. The analysis suggests that unique characteristics of EMNE investment simultaneously have positive and negative development consequences in their home countries.
Practical implications
The author sets out a research agenda that revolves around six propositions that separately relate one of these three distinct characteristics of EMNE investment to two development outcomes, namely, spillovers and direct effects on home-country employment. My propositions suggest that important policy dilemmas potentially apply, in that each of the three characteristics positively affects one of the aspects of development, but negatively the other.
Originality/value
My research agenda presents international business scholars with new opportunities to build on a history of policymaking impact, now geared toward resolving society’s grand challenge of underdevelopment.
... Bu çalışmalar içinde ele alacağımız ilk çalışma Blomström'e (1997) aittir. Blomström (1997), ABD ve İsveç'e ait firmalar üzerinden 1970-1994 dönemi verileri ile doğrudan yabancı yatırımlar ile istihdam ilişkisini incelemiştir. Çalışma sonuçlarında ABD'ye ait doğrudan yabancı yatırım yapan firmaların gelişmekte olan ülkelerde daha çok emek yoğun mal üretiminde bulundukları tespit edilmiştir. ...
Doğrudan yabancı yatırımlar gelişmekte olan ülkelerde ihracatı, iktisadi büyümeyi ve yüksek nitelikli işgücüne geçişi destekleyen özelliği ile önemli bir finansman kaynağıdır. Ayrıca bu ülkelerde doğrudan yabancı yatırımların işsizliği azaltmada önemli bir faktör olduğu da düşünülmektedir. Dolayısıyla sermaye ihtiyaçlarını 1980’li yıllarla finansal serbestleşme süreci ile başlatan gelişmekte olan ülkeler, o günlerden günümüze doğrudan yabancı yatırımları piyasalarına çekme yarışı içerisine girmişlerdir. Bu çalışmanın amacı Türkiye'de doğrudan yabancı yatırımlarının işsizlik oranına etkisini tespit etmektir. Bu bağlamda 1991-2016 dönemine ait verilerle ARDL sınır testi ve Hata Düzeltme modeline dayalı Granger nedensellik testi kullanılarak analizler yapılmıştır. Yapılan ARDL sınır testi sonuçlarına göre eşbütünleşme ilişkisinin olduğu tespit edilmiştir. Bunun yanında doğrudan yabancı yatırımlar ile işsizlik arasında kısa dönemde istatistiki olarak anlamlı bir ilişki tespit edilememiştir. Fakat uzun dönemde doğrudan yabancı yatırımlarda görülen %1’lik artış işsizliği yaklaşık olarak %0,96 oranında artırmaktadır. Ayrıca yapılan hata düzeltme modeline dayalı nedensellik analizi sonuçlarına göre uzun dönemde doğrudan yabancı yatırımlardan işsizliğe doğru nedensellik ilişkisi bulunmaktadır.
... The development of official economic growth then reduces the size of unofficial economy (Williams 2008;Shleifer 2008, 2014). Moreover, FDI creates more employments (Lall 1995;Blomström et al. 1997), and increases wages (Heyman et al. 2007), which lower shadow economy size (Boeri and Garibaldi 2002;Dell'Anno and Solomon 2008). ...
This paper empirically investigates the three-way linkages amongst foreign direct investment (FDI), shadow economy and institutional quality by applying the panel dynamic simultaneous-equation modelling approach for a sample of 19 developing Asian countries over the period of 2002–2015. The empirical results by two-step System GMM show that institutional quality attracts inward FDI and FDI in its turn improves institutional quality, institutional quality is not only the cause but also the consequence of the shadow economy, and FDI inflows help reduce shadow economies though the channel of institutional improvement and lower shadow economies – which increase institutional quality – encourage FDI inflows. The empirical insights suggest helpful policy implications to deal with these dynamics simultaneously.
... Blomstrom et al. [8] studied the OFDI of the American manufacturing industry and showed that American multinational companies arranged labor-intensive production in subsidiaries of developing countries, which had a substitution effect or negative effect on domestic employment. The research on Sweden's manufacturing OFDI suggests that Sweden has more overseas capitalintensive production arrangements, especially in the high-income countries. ...
To maintain sustainable development, the government’s macro control is very important, but the system construction of the market itself can’t be ignored. From the perspective of aggregate supply, OFDI (outward foreign direct investment) in developing countries can sustainably promote domestic employment through different kind of channels such as human capital, a reverse spillover of the international technology, and marketization processes. Based on 30 provincial panel data from 2005 to 2017, stating from the C–D production function, this article empirically estimates the total effect and regional differences in the effect of OFDI on domestic employment in China by using the main approach of Sys-GMM. The results show that the promotion effect of OFDI on domestic employment has an obvious lag; the faster the marketization process, the more significant the current period’s substitution effect and the lagged period’s promotion effect of OFDI on domestic employment. This means that it is a lagged-period process for OFDI to enhance total factor productivity and realize the effective allocation of labor resources through various channels. Furthermore, whether the domestic promotion effect of OFDI can be effectively exerted is closely related to the process of domestic marketization. A good market system environment can effectively improve the efficiency of labor resources allocation, thus promoting the sustainable development of domestic employment. China’s market-oriented transformation has not yet been completed. The sustainable growth of China’s employment depends on further promoting a market-oriented economy. Therefore, it is suggested to accelerate the improvement of market mechanisms and related system construction, strengthen the role of the government in public service, and promote the coordinated development of OFDI and IFDI (inward foreign direct investment) in various regions to promote the sustainable development of employment.
... Contrary to the general trend, the production processes moved out of the country were the ones which required higher-skilled workers. An only small proportion of Swedish companies chose to relocate their labour-intensive production to low-wage countries (Hansson 2001;Blomström et al. 1997). A similar trend was observed in the USA (Blinder and Kruger 2009). ...
This timely volume provides a thorough analysis of current trends in location and relocation of economic activity globally, regionally and locally. Using robust empirical material this book offers a multidisciplinary, comprehensive overview, critique and extension of long-established theories underpinning patterns of firm (re)location. It explores dominant trends in the mobility and relocation of industries and firms, examines the factors guiding such trends and evaluates their consequences in both developed and emerging economies in Europe, Asia and Latin America.
This book will be appreciated by diverse audiences. Geography and regional science researchers of ‘economic activity location’ can engage with the critical appraisal of key theoretical concepts and an analysis of recent empirical data. Students of human and economic geography, planning, regional development, and global supply chain management in senior years of undergraduate programmes and completing postgraduate degrees will appreciate the accessible language, multiple examples and graphical illustrations of theoretical frameworks underpinning location and relocation of firms and industries, and its consequences. Practitioners, including local and regional policy makers and location consultants will enjoy the comparative discussion of solutions and practices adopted in localities, regions and countries as diverse as China, Brazil, The Netherlands and Poland.
... He stated that US manufacturing multinationals allocated their labor-intensive business activities to developing countries which would reduce the labor intensity in US domestic production. Blomström et al. (1997) investigated the relationship between outward FDI and employment of the USA. He found that the US companies allocated their labor-intensive productions in low-wage developing countries which reduced the employment of the home land. ...
Abstract This paper uses the input–output analysis to investigate the impact of Japan’s outward foreign direct investment (FDI) on domestic production and employment in the manufacturing industry. With the expansion of Japan’s overseas business, there is a fear that the production of overseas affiliates will replace parent country’s export and output. As a consequence, it will cause job losses in the home country, especially in labor-intensive manufacturing industry. On the other hand, outward FDI also has export promotion effect on domestic economy of the home country. Parent enterprises need to export capital and intermediate goods for the construction and production of affiliates abroad in the early stage of outward FDI. This effect will enhance the export and employment of the home country. The results of this paper suggest that the negative impact of export substitution effect and inverse import effect is greater than the positive impact of export promotion effect from 2000 to 2014, which means that the total effect of Japan’s outward FDI is negative and it causes the decrease in domestic production in Japan’s manufacturing industry. As a result, it leads to the unemployment in Japan, which is called the “Hollowing-Out” effect. Also, this paper compares the calculation result of the period 2000–2014 with the period of 1990–1999 and finds that the “Hollowing-Out” of Japan has become more serious in recent years with the increase in Japan’s outward FDI. It is necessary to change the structure of economy in Japan to alleviate the unemployment problem caused by outward FDI.
... Graham and Krugman (1991) found that net impact of FDI inflow on US employment is around zero. Other recent studies including : Mickiewicz, et al. (2000) ;Dufux, (2010) ;Ernst, (2005); Ekel (2001); Malik et al. (2011);Blomström et al (1997), found positive association between FDI and employment. ...
This study is exploring the impact of FDI inflow on rural employment in comparison to urban employment with relevance to Pakistan. In the last two decades, Pakistan has received enormous FDI inflows; which has influenced various macroeconomic variables-especially: growth, investment and employment. Although, FDI has been discussed widely with employment from different aspects, however, its segregated effect on rural and urban employment has not been enough explored. We incorporate ADF unit root test followed by cointegration and Granger causality techniques to explore the existence of long run relationship between FDI, GDP and Rural and urban employment. Causality results show that FDI is only Granger-causing urban employment and not the rural. This might be articulated to the fact that urban areas have more skilled labor and FDI is mostly located nearby urban areas.
... • Foreign direct investment. According to Blomström et al. (1997) and Lipsey et al. (2010), net incoming investment is likely to reduce unemployment, while net outflow may have different effects. In addition, as Feldmann (2013) suggests that foreign direct investment is likely to be a source of international technological prevalence. ...
This paper analyses theoretical and empirical scientific literature about the impact of technological innovations on unemployment, considering the former as a key driver of long-term productivity and economic growth. Using panel data from 25 European countries for the period of 2000–2012, we aim to examine whether technological innovations affect unemployment. We used triadic patent families per million inhabitants as our main proxy for technological innovations, as well as other unemployment controls, in our model, which were estimated using System Generalized Method of Moments (SGMM). Finding no significant relationship between technological innovations and unemployment in our base estimation, we re-estimated it testing the impact with a time lag as well as using alternative proxies for technological innovations. Overall, the research estimations do not suggest that technological innovations have an effect on unemployment.
In the period of scarcity of investment capital, foreign direct investment (FDI) is an important source of its acquisition. These investments flow to the host countries in various conditions and consequences for the economy. The concept of linking the country’s position in terms of inflow and outflow of foreign direct investments with its economic development is the concept of the investment and development path – IDP (The Investment Development Path). The article diagnoses changes in the value of foreign direct investment in Poland against economies of Visegrad Group in 1995-2020, taking into account the effects of the pandemic on changes in FDI flows in 2016-2021. Against this background, the development of the Polish economy was diagnosed in the light of the path theory (IDP). The analysis covers the years 1995-2020 and 2016-2021 and uses data from UNCTAD and the World Bank. In the periods selected for the analysis, one can notice definitely different dynamics of changes in the value of FDI liabilities. The reaction of foreign investors in selected location markets varied during the pandemic. The diversification of the cumulative value of FDI receivables for individual countries is significant. During the pandemic, investors reacted to the situation in different ways. Among the selected countries, an increase in the value of FDI undertaken abroad was recorded in Slovakia and the Czech Republic. Polish investors and investors from Hungary made investments with lower values than in 2020. In all years, NOIP for Poland takes negative values, so the level of FDI undertaken in Poland exceeds the level of investments undertaken abroad. Identifying the transition to one of the most important stages on the IDP path – stage III is difficult. It is debatable to determine the period in which Poland entered such a stage. This results, among others, from low FDI. It is indicated that this is a period from 2004 to even 2013.
The literature analyzing how firms expand across international markets is extensive; however, little is known about their relationship with institutional economics, specifically institutional barriers. This chapter seeks to unveil the relationship between firm exports and some institutional barriers (at the firm, city, and country level), showing that multilevel are key to analyzing this relationship. The results show that institutional barriers (at the firm, city, and country level) affect the international business (direct exports) of firms (specifically formal firms). Thus, some conclusions and theoretical and policy implications are drawn at the end of the chapter.KeywordsFirmsExportsInstitutionsEntrepreneurship
The breakdown of the bi-polar power setting of the Cold War has coincided with the progressive neoliberal globalisation of production and integration of labour markets. This has been accompanied by new patterns of labour mobility and has distressed the nature and spatial dimension of work in several ways. After discussing the main theoretical links between labour mobility and globalisation, we survey the evolution of key indicators of trade and migration flows since 1991. We finally introduce the other chapters in the section.
North–South foreign direct investment (FDI) is frequently viewed as a process in which jobs relocate from the North to the South. I build a growth model with two asymmetric trading economies, the North where firms innovate and the South where Northern firms invest to take advantage of lower wages. Contrary to expectation, I find that lower FDI costs increase unemployment both in the North and in the South. There are two effects of FDI on unemployment, a direct positive one which contributes to the turnover of firms parallel to innovation. The indirect effect appears through innovation and growth: more FDI means higher innovation, this intensifies firm turnover and increases the unemployment rates in both countries even further. I solve the model analytically without trade costs and imitation of products in the South. For the version with trade costs and imitation I offer a numerical solution in which I also look at the effect of FDI on welfare and find a positive relation. In addition to FDI, I explore how intellectual property (IP) rights protection affects unemployment and welfare. Both are higher in a steady state with stricter IP protection.
This paper explores the influence of traditional and ESG stock market indices on a country’s net international investment position. To do this, different methods, including ANOVA analysis, multiply regression analysis, correlation analysis, VAR-analysis and R/S-analysis, as well as the Granger causality test, are applied to quarterly data on the net international investment position, traditional and ESG indices from Finland, Sweden, France, Spain and Ukraine over the period 2005–2021. The results of descriptive statistics show that ESG indices are more volatile than traditional, but these differences are statistically insignificant according to ANOVA analysis. Correlation analysis provides direct evidence that ESG indices are highly correlated with their traditional analogues (correlation level varies from 0.88 to 0.96). Regression analysis results show that traditional and ESG stock market indices have no significant impact on the net international investment position. ESG stock market indices and net international investment position data are persistent, and autoregressive models can be applied to these data sets. On average, Hurst exponent is above 0.75 for the case of ESG indices and above 0.85 for the net investment position. This paper provides recommendations to improve the responsible investment framework.
Acknowledgment Alex Plastun gratefully acknowledges financial support from the Ministry of Education and Science of Ukraine (0121U100473).
This paper investigates whether and how trade policy uncertainty (TPU) in major economies affects global foreign direct investment (FDI) flows. Using China’s World Trade Organization accession as a quasi-natural experiment, we find that China’s FDI inflows increased more in industries experiencing greater TPU reduction in the US market (China’s largest export destination market) than those in industries experiencing less reduction in TPU. We also find that TPU reduction is associated with larger increases in FDI inflows in industries with higher export intensities, suggesting that TPU reduction induces multinational firms to serve the US market through building and expanding affiliates in China. The findings suggest that TPU reduction in major economies would help global FDI flows to recover from the current pandemic.
Bu çalışmada Türkiye’ye yönelik doğrudan yabancı yatırımların (DYY) kadın istihdamı üzerindeki etkisinin farklı sektörler bazında analiz edilmesi amaçlanmaktadır. 2004-2012 dönemi için yıllık verilerin kullanıldığı çalışmada, yöntem olarak dinamik panel veri analiz tekniği uygulanmıştır. Analiz sonuçlarına göre, DYY’lerin kadın istihdamı üzerindeki etkisi negatif iken, Gayri Safi Yurtiçi Hasıla (GSYİH)’nın etkisi pozitiftir. Söz konusu çalışmanın alan yazınına katkısı, Türkiye’deki DYY’lerin toplam istihdam düzeyinden ziyade kadın istihdam düzeyi üzerindeki etkisinin sektörel olarak incelenmesidir.
Purpose-The purpose of this paper is to examine the impact of outward foreign direct investment (FDI) on Vietnam's economic growth.
Design/methodology/approach-The GDP regression method according to OFDI, which takes into account the effect of exports, with continuous secondary data from 1998-2019. Findings-The results indicate that outward FDI from Vietnam had a positive impact on the it's GDP growth. Specifically, if OFDI capital increases by 1 unit, Vietnam's real GDP will increase by 9.38 units. Therefore, it is recommended that Vietnamese policymakers should have a more positive awareness of OFDI, as well as have active supportive policies for Vietnam's OFDI to bring about national benefits. Keywords: Outward FDI, OFDI, FDI, Foreign direct investment
In this paper, we are presenting the reaction employment, wages, prices, industrial production, real effective exchange rate and wages on one standard deviation shock from foreign direct investments. We have used the vector autoregressive model with sign restrictions, where those restrictions are defined by Uhlig’s penalty function. The result shows that the main aggregates have the expected reaction. Considering the nature of the investments, their effects are in accordance with the macroeconomic logic. Consumption is an obvious channel for the positive reaction of employment and wages, where wages are, conditionally speaking, the measure of the labor’s productivity.
The global economic system has undergone fundamental changes in the last two decades due to the proliferation of free trade agreements, the deepening of the European Union (EU) integration process and increased foreign direct investments (FDI) altering the economic landscape across and within countries. This thesis aims to improve our understanding of the effects of trade and outward FDI across three dimensions. By examining the effects on the domestic industry, and by detecting the regional footprint in terms of growth and the skill composition of labour markets, the empirical findings offer a multi-faceted and multi-level analysis with evidence from South America and the EU. This thesis is structured into an introductory chapter and three analytical papers. The first paper explores the effects of import competition on the manufacturing sector in Chile following the implementation of the country’s two most important Free Trade Agreements with the USA and China. The findings reveal that increased import penetration from China and USA has highly heterogeneous effects with Chinese trade creating more pronounced substitution effects for the domestic industry than trade with USA. The analysis sheds new light on the importance of foreign investment and export intensity – in reversing the negative import substitution effect - due to the opportunities offered from the participation in Global Value Chains. The second paper examines the link between trade and economic growth across the regional income distribution in Greece, during the period after the country joined the European Monetary Union (EMU) incorporating the global economic crisis period. The aim of the analysis is to identify heterogeneous trade effects across the regional income hierarchy. Among the original contributions of this study is that contrary to the prevailing view, EU trade appears negative for the more economically advanced regions and has insignificant effects on lower income regions; while global trade and EU trade differ significantly in their respective growth returns across the income distribution. Finally, the third paper empirically investigates the association between increased outward foreign direct investment (OFDI) and the evolution of the occupational composition at the regional level for Greece, a small peripheral EU economy. The emergence of Greece as an international investor in the Balkan region constitutes an interesting setting of a peripheral EU country investing in peripheral new EU member states and reveals the strong spatial footprint on the occupational structure of home regions, offering valuable policy implications for countries in pre-EU accession phases.
L’influence de l’investissement direct à l’étranger (IDE) sur les niveaux d’emploi et de salaires est théoriquement équivoque. En revanche, d’après les données statistiques, l’IDE français s’inscrit dans une stratégie de conquête de parts de marché à l’étranger : la majorité des IDE est réalisée dans le secteur des services et à destination des pays de l’OCDE. Les études empiriques confirment que le coût du travail est un facteur secondaire de la décision d’implantation à l’étranger. Le niveau de l’emploi et des salaires dans la maison mère apparaît d’ailleurs positivement corrélé avec l’activité des filiales à l’étranger. S’il ne semble pas y avoir substitution avec l’investissement domestique, l’investissement sortant semble au contraire exercer une influence positive sur le niveau des exportations. Mots-clés : investissement direct à l’étranger, commerce international, emploi, salaires
Challenging populist views of outward foreign direct investments (OFDIs) that suggest they move prosperity abroad, this article builds a model suggesting that OFDIs support urban-regional income levels due to (1) labor; (2) knowledge; and (3) multiplier, spillover, and intermediate input effects. In a panel study of median incomes in US urban regions between 2005 and 2013, we first establish a base model that measures income as a function of local factor endowments (high skill levels, fast-growing and technologically sophisticated industries, and urban scale effects). This base model is highly significant. In the next step, we extend this model by adding our main variables of greenfield inward and outward investment intensity, and finally we integrate other indicators that measure the geographic, industrial, and functional composition of OFDIs. While the results for other investment-related indicators are mixed, the main investment variables are highly significant, thus providing strong support that greenfield OFDIs act as a catalyst of urban-regional income development.
This study investigates whether and how outbound foreign direct investment (FDI) boosts or reduces domestic employment by multinational enterprises (MNEs). Based on analyses of a firm-level sample of 18,252 subsidiary-year cases of Japanese MNEs in 59 countries from 1996 to 2010, the findings indicate that outbound FDI motivated by (1) market seeking for scale and scope expansion, (2) natural resource seeking, or (3) strategic asset seeking tends to serve as a “strategic complement” that enhances domestic employment by MNEs. However, outbound FDI motivated by (4) market seeking associated with declines in domestic demand or (5) labor resource seeking tends to act as a “strategic substitute” that reduces domestic employment by MNEs. The implications for theory, practice, and policymaking are discussed.
Purpose
This paper aims to analyse the change in performance of parent Indian firms (home effects) who have invested in overseas locations in recent times.
Design/methodology/approach
Difference-in-difference (DiD) estimate of home effects using farm level data.
Findings
Home effects of Indian outward foreign direct investment (OFDI), in general, are insignificant. However, in the case of OFDI directed only to non-offshore financial centre (OFC), some firms did enjoy beneficial home effects with respect to turnover, current ratio and leverage ratio. In the case of OFDI directed purely to OFC locations, some of the parameters exhibited negative home effects. In the subsample of Indian OFDI directed to combination of OFC and non-OFC locations, the results show positive home effects with respect to export, operating profit margin and forex earnings; however, impact on turnover seems to be negative for all the quartiles.
Research limitations/implications
Estimation of home effects using data over longer horizon may yield robust outcome.
Practical implications
These results make a strong case to draw a distinction among OFDIs to OFC, non-OFC and combination of OFC and non-OFC locations in studying the beneficial home effects of OFDI.
Originality/value
To the authors’ knowledge, this is the first paper which estimates home effects of different groups of Indian firms (based on their investment locations and size class) using difference-in-difference estimate.
Impelled by ever more rapid changes in today’s global, national, regional and local markets, enterprises are under constant pressure to adjust and adapt to changing conditions and circumstances. This process, commonly referred to as corporate restructuring, plays out across many dimensions, including the geographical, which involves changes in preferred locations, ultimately prompting companies to migrate and relocate. Any type of restructuring may result in the loss of some or all jobs. One particularly sensitive issue is having entire or parts of companies move to another region or country ravaging the local labour force in the process. The problem was discussed in the so-called old EU member states during its biggest enlargement in 2004. Fears and anxieties over jobs which companies, and especially large transnationals, transferred to the “new” EU member states became commonplace in surveys and statements presented in economic, social and political forums. Against this background, it has become vital to answer the following three frequently asked questions: (1) What is corporate delocalisation and how does it relate to enterprise migrations, relocations, offshoring and outsourcing? (2) What methods are available for estimating the impact of delocalisation abroad on employment? (3) How does delocalisation impact upon the labour market in the countries from which businesses are moving to other locations?
Prior international political economy public opinion research has primarily examined how economic and socio-cultural factors shape individuals’ views on the flows of goods, people and capital. This research has largely ignored whether individuals also care about rewarding or punishing foreign countries for their policies on these issues. We tested this possibility by administering a series of conjoint and traditional survey experiments in the United States and China that examined how reciprocity influences opposition to foreign acquisitions of domestic companies. We find that reciprocity is an important determinant of public opinion on the regulation of foreign investments. This suggests the need to consider the policies that other countries adopt when trying to explain public attitudes toward global economic integration.
Bu çalışmada Türkiye'ye yönelik doğrudan yabancı yatırımların (DYY) kadın istihdamı üzerindeki etkisinin farklı sektörler bazında analiz edilmesi amaçlanmaktadır. 2004-2012 dönemi için yıllık verilerin kullanıldığı çalışmada, yöntem olarak dinamik panel veri analiz tekniği uygulanmıştır. Analiz sonuçlarına göre, DYY'lerin kadın istihdamı üzerindeki etkisi negatif iken, Gayri Safi Yurtiçi Hasıla (GSYİH)'nın etkisi pozitiftir. Söz konusu çalışmanın alan yazınına katkısı, Türkiye'deki DYY'lerin toplam istihdam düzeyinden ziyade kadın istihdam düzeyi üzerindeki etkisinin sektörel olarak incelenmesidir.
Factors Affecting Foreign Direct Investment in a Small Town in America
C. Joe Ueng, Ph.D. CFA; C. Christopher Lee, Ph.D; Noel Gee
Abstract
The purpose of this research is to investigate factors affecting the acceptance of outside investment in a small city in the Midwest area in the United States. These factors include research and development, education, tax breaks, cultural diversity and local government support. A significant amount of research has been conducted on FDI in developing counties. Yet, little research focuses on determinates of FDI locations in developed countries and how the community members feel about FDI in general. An online survey was conducted in a small city in the Midwest. Multiple regression and ANOVA models were developed. The multiple regression models showed statistical significance, in which factors such as research and development and education proved to be statically significant.
Full Text: PDF DOI: 10.15640/rcbr.v5n2a2
The descriptive part of this research focuses on the latest trends in U.S. inward Foreign Direct Investment (FDI) and describes the U.S. inward FDI flows and stock as a percentage of Gross Domestic Product (GDP) and includes geographic and sectoral distribution of inward U.S. FDI. The important part of U.S. inward FDI profile relates to inward U.S. FDI employment and inward U.S. FDI financial flows, which include equity, reinvested earnings, and intercompany debt. The corporate players, Mergers and Acquisitions(M&A’s) and green field investment are discussed briefly. The empirical part of this research investigates state-based factors affecting the inward FDI employment among 50 states of the United States and is based on data collected by the Commerce Department’s Bureau of Economic Analysis (BEA). This study identifies several state-specific determinants of FDI employment. The results indicate that the major factors exerting positive impact on inward U.S. FDI employment are: real wages, infrastructure, unionization level, educational attainment, FDI stock, and manufacturing density. In addition, the results show that gross state product growth rate, real per capita taxes has negative impact on FDI employment.
Effects of Overseas Production on Home Country Exports: Evidence Based on Swedish Multinationals. —Using unique data on Swedish
multinationals 1974–1990, the impacts of overseas production on parent exports are analyzed. Two methodological applications
are introduced: (i) In order to avoid sample selection bias, the model includes also countries to which the firm exports,
but has not established any affiliates; (ii) the effect of affiliate exports to “third countries” is incorporated. The results
suggest that increased foreign production both replaces exports of finished goods and attracts intermediate goods from the
parent. In contrast to previous studies, the net effect is negative, albeit significant only in the case of affiliate exports
in the EC.
This paper studies both the domestic and foreign fixed investment expenditures of a sample of US multinational firms. In addition to explaining empirically each type of investment, an important goal is to determine wheter there are significant interactions between expenditures in the different locations. Hypotheses are tested on a unique sample of micro-economic data covering the domestic and foreign operations of seven multinational firms for a period of 16 to 20 years. In general the firm-level invesment functions fit reasonably well for both domestic and foreign expenditures. Because of an interdependence through the financial side, interactions between domestic and foreign fixed investment were frequently confirmed. (JEL F23).
One tradition in international economics explains international trade as a phenomenon caused by differing national comparative advantages arising from different states of development. This approach leads to the conclusion that under a catching-up hypothesis the amount of trade might be expected to diminish over time. The authors analyse trade between Sweden and the United States, emphasising the R&D component of trade. They conclude that specialisation has occurred in the R&D intensity of goods being traded and that this has increased the scope for trade.
JEL: F10
This paper examines two broad issues related to foreign investment by Swedish multinationals: first the effects of outward foreign direct investment on domestic investment, exports, and employment, and second, the effects on the domestic economy from the increasing division of labor between the parents and foreign affiliates of Swedish MNCs. The paper summarizes and synthesizes the existing empirical evidence on these matters (much of which has hitherto only been available in Swedish) and discusses some possible long run effects that have not received much attention in the literature.
Interest in U.S. trade policy has been stimulated in recent years by the massive American trade deficit, by the belief that intervention by foreign governments in international markets has given other countries a competitive edge over the United States, and by concern about the increase in protectionism among industrial countries. In turn, major analytical developments in international economics have revolutionized trade theory, broadening its scope both by introducing in a more formal manner such concepts as imperfect competition, increasing returns, product differentiation, and learning effects and by including the study of political and economic factors that shape trade policy decisions. This collection of papersâthe result of a conference held by the NBERâapplies these "new" trade theories to existing world cases and also presents complementary empirical studies that are grounded in more traditional trade theories. The volume is divided into four parts. The papers in part 1 consider the problem of imperfect competition, empirically assessing the economic effect of various trade policies introduced in industries in which the "new" trade theory seems to apply. Those in part 2 isolate the effects of protection from the influences of the many economic changes that accompany actual periods of protection and also examine how the effects from exogenous changes in economic conditions vary with the form of protection. Part 3 provides new empirical evidence on the effect of foreign production by a country's firms on the home country's exports. Finally, in part 4, two key bilateral issues are analyzed: recent U.S.-Japanese trade tensions and the incident involving the threat of the imposition of countervailing duties by the United States on Canadian softwood lumber.
Thesis (Ph. D.)--University of California, Los Angeles, 1979. Includes bibliographical references (p. 282-287). Photocopy. s
Foreign production by a United States firm does not, on balance, substitute for exports by the firm from the United States to the area in which the production takes place. In general, the higher a firm's output in a foreign area, the larger its exports from the United States to that area. The relationship is strong between foreign output and exports of intermediate goods for further processing, but foreign production is also positively related to the firm's exports of finished products from the United States.
This paper investigates empirically the importance of technological catch-up in explaining productivity growth in a sample of countries since the 1960s. New proxies for a country's absorptive capability--based on data for students studying abroad, telecommunications and publications--are tested in regression models. The results indicate that absorptive capability is a factor in explaining growth, with the most robust finding that countries with relatively high numbers of students studying science or engineering abroad experience faster subsequent growth. However, the paper also indicates that the significance of coefficients varies across specifications and samples, suggesting caution in focusing on individual results. Copyright 2004, Oxford University Press.
This paper investigates empirically the importance of technological catch-up in explaining productivity growth in a sample of countries since the 1960s. New proxies for a country's absorptive capability--based on data for students studying abroad, telecommunications and publications--are tested in regression models. The results indicate that absorptive capability is a factor in explaining growth, with the most robust finding that countries with relatively high numbers of students studying science or engineering abroad experience faster subsequent growth. However, the paper also indicates that the significance of coefficients varies across specifications and samples, suggesting caution in focusing on individual results. Copyright 2004, Oxford University Press.
) Effects of U Direct Inestments Oerseas : Final Report
- W B Reddaway
Reddaway, W. B. (). Effects of U Direct Inestments Oerseas : Final Report. Cambridge : Cambridge University, Dept. of Applied Economics, Occasional Papers : .
Bureau of Economic Analysis
- D C Washington
Washington, D.C. : Bureau of Economic Analysis, U.S. Department of Commerce. # Royal Economic Society
- Kravis
- Baldwin
- Blomström
- Brainard