Multinational enterprises and wage costs: vertical FDI revisited

Braconier, Henrik; Norbäck, Pehr‐Johan; Urban, Dieter

doi:10.1016/j.jinteco.2004.08.011

Cited by 104 publications

(75 citation statements)

References 23 publications

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“…Most of the discussion on globalization, and definitely the debate on GVC specialization, refer to the non-market seeking type of FDI. Vertical FDI is traditionally related to the desire of MNEs to exploit factor cost differentials in locations that are relatively abundant with different factors of production (Braconier et al 2005;Markusen, 1995). The term vertical FDI is used loosely referring to: (i) resource exploiting MNE activities in a foreign country to serve the home market in a more efficient way; (ii) the concentration of production activities abroad which are subsequently shipped back to the parent in the home country (intra-firm exports); and (iii) the splitting up of the value chain in multiple countries increasing the intra-firm exports between affiliates located in several host countries.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

Is There a Trend Towards Global Value Chain Specialization? An Examination of Cross Border Sales of US Foreign Affiliates

2008

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In this study we discuss and empirically test the assertion that over the last two decades multinational enterprises' (MNEs') configuration of value-adding activities has shifted from a sparse and simple (host-home) international division of labor among the foreign affiliates to a more specialized and 'advanced' global value chain configuration in which MNEs locate finesliced parts of the value chain at the most efficient locations. Using data on trade flows of U.S.affiliates in 56 host countries between 1983 and 2003 we find some indications of a trend in the direction of global value chain specialization. In particular among US affiliates in developing countries the proportion of host-host, intra-firm trade has increased significantly during the observed period of time. Conversely, the proportion of host-home and inter-firm trade has diminished. We interpret this as indicating both value chain disaggregation (vertical specialization) and MNEs' systematic exploitation of factor cost differentials across countries.We also find that the absolute levels of all types of trade flows have increased. Hence, it is the relative, and not the absolute, changes in the trade flow patterns of US affiliates that gives credibility to the global value chain assertion.

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Section: Theory and Hypothesesmentioning

confidence: 99%

Is There a Trend Towards Global Value Chain Specialization? An Examination of Cross Border Sales of US Foreign Affiliates

2008

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“…12 Braconier et al (2005) support vertical motives of multinational activities. They find that more FDI takes place in countries where unskilled labor is relatively cheap.…”

Section: Production Cost Effectsmentioning

confidence: 91%

Organization of Multinational Activities and Ownership Structure

Mugele

Schnitzer

2006

SSRN Journal

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We develop a model in which multinational investors decide about the modes of organization, the locations of production, and the markets to be served. Foreign investments are driven by market-seeking and cost-reducing motives. We further assume that investors face costs of control that vary among sectors and increase in distance. The results show that (i) production intensive sectors are more likely to operate a foreign business independent of the investment motive, (ii) that distance may have a non-monotonous effect on the likelihood of horizontal investments, and (iii) that globalization, if understood as reducing distance, leads to more integration.

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“…whereby resource-and efficiency-seeking MNEs relocates low-skilled production process to low-wage countries to reduce production cost, thereby generating a negative relationship between FDI and real wages (Braconier, Norback and Urban, 2005). On the other hand, Yang, Groenewold and Tcha (2000) argue that FDI that focuses on skilled workers may overlook higher wages resulting in a positive relationship between wage and FDI inflow in services.…”

Section: Independent Variablesmentioning

confidence: 99%

The Determinants of Inward FDI in Selected ServiceS Industries in MalaysiA

Tham¹,

Kam²,

Noh

2018

Prague Economic Papers

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In its drive to achieve a high-income country status, Malaysia aspires to attract more private investment into the services sector. However, empirical studies on the determinants of foreign direct investment (FDI), especially in the services sector, are sparse, even more so at the industry level. The location theory asserts that FDI inflows into a host country are determined by variables related to resources, infrastructure, market conditions, cost and business environment. This paper investigates the validity of the location theory on Malaysia using a set of panel data for eight services industries from 2003 to 2010. We find that at the industry level, market size, ICT infrastructure and human capital have significantly influenced FDI inflows into the services sector. However, the impact of FDI liberalisation is not significant compared to the dynamic changes of the other variables as progress in FDI liberalization is slow and limited.

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Multinational enterprises and wage costs: vertical FDI revisited

Cited by 104 publications

References 23 publications

Is There a Trend Towards Global Value Chain Specialization? An Examination of Cross Border Sales of US Foreign Affiliates

Is There a Trend Towards Global Value Chain Specialization? An Examination of Cross Border Sales of US Foreign Affiliates

Organization of Multinational Activities and Ownership Structure

The Determinants of Inward FDI in Selected ServiceS Industries in MalaysiA

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