The determinants of foreign direct investment: An analysis of US manufacturing industries

Abstract

This study explores the determinanb of foreign direct invesbaent by analyzing the variation across U S manufacturing indnstdea in the extent of outward foreign direct investment. lbree types of industry rhatncterhties are hypothesized to explain this variation. Empirical support i s found for four sources of ownenhipapedlic advantages favoring foreign direct investment, new technology created k n g h research and development, marketing abilities, organizatkmal techniques and a p i g l m t advanhges. Support is found for the mle of pmdnrtion scale economies in favoring cenb.liption and hindering foreign direct investment. but resnlts suggest only a weak role for trnnsport co& in favoring decentrnlhtlon and foreign direct investment. Rodurn concentration. perhaps reflecting oligopolistic competition, is positively related to foreign direct investment.

Trends in foreign direct investment flows: a theoretical and empirical analysis

“…Significant relationships have been found between FDI and technological intensity (Lall, 1980), firm size (Li and Guisinger, 1992), capital intensity (Pugel, 1981) and product differentiation (Caves, 1971). These studies, however, provide only the rationale and a generalized modus operandi for FDI, without explaining regional variations.…”

Macroeconomic Determinants of Direct Investment Abroad of Singapore

“…According to among others, Hymer (1976), Lall, 1980, Prugel (1981, Grubaugh (1987), Kyrkilis and Pantelidis (2003) and Williams (2009), home interest rate has an inverse impact on DIA. For a firm which is looking for investment in foreign countries, lower interest rate will decrease its opportunity cost of funding capital abroad.…”

A closer look at the productivity advantage of foreign affiliates

“…Previous work largely has assumed constant returns to scale to prevail for all firms, irrespective of firm ownership in spite of the fact that earlier research has showed that MNEs are typically active in industries characterized by economies of scale (Horst, 1972;Pugel, 1981;Dunning, 1993;Caves, 1996). No evidence, however, has been reported on the scale advantage of MNEs within industries.…”