The Economics of Foreign Direct Investment and Trade with an Application to the U.S. Food Processing Industry

Abstract

This article investigates the determinants of foreign direct investment and its relationship to trade in the U.S. food industry. A multinational corporation maximizes profits by choosing between production at home, which is exported, and production in a host country. This introduces the possibility that foreign affiliate sales can substitute and/or complement exports. The empirical framework consists of a four-equations system with foreign affiliate sales, exports, affiliate employment, and FDI as endogenous variables. The results confirm small substitution between foreign sales and exports, and that the host country's protection policies affect the decision to invest abroad. Copyright 1999, Oxford University Press.

Determinants of foreign direct investment in services

“…Moshiran (1997) finds exchange rates significant, according to his results a host country currency appreciation increases FDI in the insurance industry. This result is contrary to that typically found for manufacturing industries (Campa et al (1998), McCorriston and Sheldon (1998), Gopinath et al (1999), Kogut and Chang (1996)). Yamori (1998) service sectors, and in services as a whole.…”

A pendulum gravity model of outward FDI and export

“…This paper concentrates on the relationship between export and outward FDI, where debate goes on with regard to substitution or complementation between them. It is argued that outward FDI substitutes export in many studies, including Vernon (1966), Buckely and Casson (1981), Gopinath, Pick and Vasavada (1999), among others. A few are by design for substitution, such as Oberhofer and Pfaffermayr (2012), Lankhuizen et al (2011) and Chang and Gayle (2009).…”

Cross-border acquisitions in the global food sector

“…See also Brakeman et al (2006). 12 Other studies of FDI in the food sector (including those using non-US data) include: Ning and Reed (1995), Anastassopolulos and Traill (1998), Gopinath et al (1999), Benito (2000), Barkley (2005), Guiletti et al (2004) and Tozanli (2005). 13 See reference to McCorriston and Sheldon (1998) above and Cho et al (2002).…”