The Determinants of New FDI Capital Flows into the EC: A Statistical Comparison of the USA and Japan

Abstract

This article reviews the link between European integration and foreign direct investment (FDI) into the European Community (EC). A model is constructed using comparable US and Japanese data on new FDI flows for 1984-89. The data are clustered and pooled to enable intra-EC differences in the model to be investigated. It is found that new FDI has been linked to conventional host characteristics variables, whose effects vary considerably between groups of member countries. Differences between the equations for the USA and Japan are attributed to the contrasting degrees of establishment of US and Japanese affiliates. For Japanese firms, as comparative outsiders (compared with US firms), the impact of the announcement of the single market programme (SMP) has been marked.

Capital flows and office markets in major global cities

“…There has also been extensive research examining Foreign Direct Investment (FDI) capital flows. The study by Scott-Green and Clegg (1999) examined the linkages between European integration and FDI foreign direct investment. Utilising comparable US and Japanese data on new FDI flows between 1984 and 1989, the authors pooled the data to enable intra-EC differences to be investigated, illustrating that FDI is linked to conventional host characteristics variables whose effects vary considerably between groups of member countries, with Japanese firms more significantly impacted.…”

Determinants of Foreign Direct Investments: Dynamic Panel Data Evidence

“…This concern for the determinants of FDI has resulted specifically from the increasing importance of FDI inflows in the economic development of countries. There have been many previous studies with particular focus on identifying the potential determinants of FDI by looking from different perspectives, including macroeconomic, financial, demographic, political and social determinants (see also Scott-Green & Clegg, 1999;Alsan, Bloom, & Canning, 2006;Kimino, Saal, & Driffield, 2007). On the other hand, other examples of previous literature have analyzed empirically how these selected determinants affect FDI at national, regional and global levels (see also Bende-Nabende, Ford, & Slater, 2001;Busse & Hefeker, 2007;Birsan & Buiga, 2009).…”

The Strategic Development of Foreign-Owned Subsidiaries and Direct Employment in Host Locations in the United Kingdom

“…None of the embeddedness factors is significantly associated with employment growth, and, among the decisionmaking and operational autonomy factors, only increase in scope of operations is strongly linked to employment growth. Some literature suggests that traditional factors, such as size of the market, developing markets, tax/subsidy benefits, and labour-cost advantages are more important, at least in Europe, than are embeddedness and strategic factors as drivers of DFI (Mold, 2003;Phelps, 1997;Scott-Green and Clegg, 1999). Thus, despite significant advances in European integration programmes and public policies that have sought to enhance the importance of new locational factors (Phelps et al, 2003), traditional factors may still be the main drivers of the employment effects associated with DFI.…”

“…Studies at plant level on the motivations for the strategic development of subsidiaries have provided evidence that the following factors have a significant influence: entry mode (greenfield, brownfield, or joint venture), region, main type of activity of subsidiary (manufacturing, services, sales and distribution, and R&D), industry, size and age of subsidiaries, use of expatriate managers, labour costs, and technology transfer from parent companies (Pearce and Papanastassiou, 1997;Scott-Green and Clegg, 1999;Tavares and Pearce, 2001;Young et al, 1994). Therefore, empirical investigation of the development of subsidiaries and employment effects at the plant level needs to control for these factors.…”