Effects of Outward Foreign Direct Investment on Domestic Investment: The Cases of Brazil and China

Gondim, Igor Jordano Cassemiro; Ogasavara, Mário Henrique; Masiero, Gilmar

doi:10.1002/jid.3368

Cited by 17 publications

(5 citation statements)

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“…Domestic firms need to get bigger to compete with foreign associations. The results are similar to the studies that find crowding-in effects of outward investments on domestic investments (Gondim et al. , 2018).…”

Section: Discussionsupporting

confidence: 89%

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Domestic, inbound and outbound M&A activity interdependence in Brazil

Kumar

Saikia

Mundi

2022

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PurposeMergers and acquisitions (M&As) are of three types: domestic, inbound and outbound cross-border. Inbound M&As provide an inflow of foreign funds into the economy, whereas outbound M&As involve the outflow of domestic funds. This paper examines the impact of domestic and cross-border mergers and acquisitions in Brazil on each other.Design/methodology/approachThe authors analyze M&A activity in Brazil and examine the impact domestic, inbound and outbound M&As have on each other. The study uses a vector auto-regressive model to test the relationships for each quarter of 2000–2018. The M&A activity is operationalized using the total number of deals and the cumulative value of the deals in a particular period.FindingsThe results depict stark contrast for M&A activity measured through incidences and monetary value. Overall, the number of deals can better explain each other than value. The authors find that, in terms of incidences, domestic M&A is Granger caused by both outbound and inbound M&As together. Further, inbound and domestic M&As together Granger cause outbound M&As in terms of aggregate monetary value. The impulse response function reveals that incidence shocks created in M&A activity are longer lasting than the value shocks.Practical implicationsThe results have implications for businesses and policymakers. The study reveals the complexities of crowding effects important for businesses. The government needs to structure its future investment-promotion strategies depending on the objectives related to the number and value of M&A activity.Originality/valueThe study uses econometric tools and empirical methods to find the unexplored nature of the relationship between domestic, outbound and inbound cross-border M&As.

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Section: Discussionsupporting

confidence: 89%

“…Brazil is the top FDI destination in Latin America and the Caribbean by a vast margin (Assessment, 2004). We find that studies on FDI have conflicting relationships between outbound and domestic investments in Brazil (Ipek and Kizilgöl, 2015; Gondim et al. , 2018).…”

Section: Introductionmentioning

confidence: 78%

Domestic, inbound and outbound M&A activity interdependence in Brazil

Kumar

Saikia

Mundi

2022

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“…Some studies illustrate that OFDI replaces domestic economic activities, leading to a reduction in domestic investment (Feldstein, 1995; Stevens & Lipsey, 1992). Conversely, other studies find a positive correlation between overseas and domestic investments (Desai et al., 2005; Gondim et al., 2018). We add to this branch of literature and conclude that the pattern observed in the data is consistent with a story of resource misallocation.…”

Section: Introductionmentioning

confidence: 78%

The effectiveness of government incentives for outward investment: The case of China's Belt and Road Initiative

Xu,

Yang,

Zheng

2024

Contemporary Economic Policy

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Chinese government introduced a package of incentives to encourage enterprise internationalization under the 2013 Belt and Road Initiative. There is regional variation of this policy incentive, based on which, we examine its impact on listed firms' outward investment. The results evident resource misallocation in firms in specific industries which received incentives; instead of utilizing them for overseas investment, the beneficiary firms were directed toward increasing domestic investment. Contrarily, firms in industries that were not incentivized (restricted industries whose domestic development is not encouraged) were inclined to engage in overseas investment. We provide possible explanations.

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“…The results of columns ( 2) and (3) in However, the marketization degree and economic level of the midwestern provinces lag behind relatively. On the one hand, the OFDI of these provinces could squeeze out their own investment (Gondim et al 2018), and detrimental to technological innovation, then counteract the promoting effect of OFDI on GEE; on the other hand, the technological gap between the midwestern regions and developed countries is relatively large, which is not conducive to absorbing the reverse technology spillovers through OFDI (Hong et al). Therefore, the promoting effect of OFDI on GEE in midwestern China is not significant.…”

Section: Instrumental Variable Methodsmentioning

confidence: 99%

Can outward foreign direct investment improve China’s green economic efficiency?

Wang

2022

Environ Sci Pollut Res

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Will outward foreign direct investment (OFDI) help promote the green transition of China's economy? Our study adopts the inter-provincial panel data of China from 2011 to 2019 to explore the influence of OFDI on green economic efficiency (GEE). We find that OFDI significantly improve China's GEE, robustness tests still support this conclusion. We also find that the reverse technology spillover obtained from developed countries through OFDI promotes the growth of GEE. Heterogeneity analysis shows that, OFDI significantly promotes GEE in eastern China, however, this promotion effect is not significant in midwestern China. Besides, the promoting effect of OFDI on GEE has been further improved after 2016. This paper further finds that there exists a threshold effect of OFDI on GEE, when the financial development and human capital exceeds 2.0954 and 0.0290, respectively, the promoting effects of OFDI on GEE are greatly enhanced.

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Effects of Outward Foreign Direct Investment on Domestic Investment: The Cases of Brazil and China

Cited by 17 publications

References 61 publications

Domestic, inbound and outbound M&A activity interdependence in Brazil

Domestic, inbound and outbound M&A activity interdependence in Brazil

The effectiveness of government incentives for outward investment: The case of China's Belt and Road Initiative

Can outward foreign direct investment improve China’s green economic efficiency?

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