Abstract
In recent years there has been a blossoming of research on the determinants and effects of FDI on the firm level. This is due not only to increasing availability of micro data but also to one major insight of International Trade Theory: While sticking to the ‘general equilibrium’ standard, models have to deviate from ‘perfect competition’ and ‘constant returns to scale’ assumptions in order to fully appreciate the heterogeneity of the motives for and implications of FDI. Markusen (2008) states that – in contrast to the macroeconomic treatment of FDI as simple capital flow – trade theory has already differentiated since the 1980s between FDI and portfolio investments. However, only recently do the bulk of researchers anatomise further the effects of FDI on different groups (the affiliate firm, competitors, suppliers or the aggregate country) and also distinguish between various forms of FDI (greenfield investment, mergers, foreign acquisitions (majority and minority ownership), joint ventures).
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Compare Chap. 2.3.
- 2.
Section 4.1 is not intended to add another extensive review to the bulk of already existing survey literature or to the specialised industrial organisation and the international economics literature on what drives firms to invest abroad. The presentation here is confined to the main bullet points mentioning the core theoretical contributions that are needed in the subsequent discussion about the causal effects of foreign investment for host countries and target firms (Sect. 4.2). The reader is referred to the extensive discussions on the determinants of FDI in Barba Navaretti and Venables (2004), Blonigen (2005) and Caves (2007).
- 3.
See i.a. Mundell (1957).
- 4.
- 5.
See Chap. 2 for definitions.
- 6.
Coase (1937).
- 7.
- 8.
For example by acquiring inputs from a specialised supplier one may profit from higher quality.
- 9.
The authors of these contributions were primarily concerned with greenfield investment. However, most arguments are general enough that their scope can be extended on M&A as well.
- 10.
- 11.
Greenaway and Kneller (2007) provide a more detailed discussion.
- 12.
- 13.
Two countries, two goods and two factors of production.
- 14.
- 15.
Compare to the OLI paradigm described above.
- 16.
The model itself is not solvable analytically, thus the usage of numerical methods is necessary.
- 17.
See also Markusen and Venables (2000).
- 18.
- 19.
Hanson et al. (2001) also find strong evidence for vertical FDI and the export-platform motivation.
- 20.
For example Baltagi et al. (2007) differentiate between two complex horizontal type MNEs (both with plants at home and in a host country) and two complex vertical types (both with plants at home and in a third country): (i) horizontal firms exporting from home to the third country, (ii) horizontal export-platforms exporting from the host to the third country; (iii) vertical firms exporting from the host country to the home market; and (iv) complex vertical MNEs with exports from the third country to home.
- 21.
- 22.
- 23.
The literature here explicitly uses the terminology of ‘wholly-owned foreign entities’ and ‘plant set-up costs’ (e.g. Barba Navaretti and Venables 2004). Referring to the definition of M&A in Sect. 2.1, it is certainly possible to include outright- and majority-owned M&A in this theoretical reasoning as well. Being of different type and probably different nature, these M&A modes also included fixed costs similar to set-up costs. Additionally, the foreign investor is entitled with control rights that classify these transactions as internalisation. Recently, a brand new strand of literature is forming, dealing also with M&A and its determinants. However, the focus of this rather lies in the distinction of GI and M&A motivations. These theories are discussed separately in the next section.
- 24.
See also Barba Navaretti and Venables (2004).
- 25.
Or the ‘Property-Rights Approach’ to the firm in the international setting.
- 26.
See also Grout (1984).
- 27.
- 28.
Licencees are able to fastly and fully absorb the knowledge-capital of their partners. Barba Navaretti and Venables (2004) present two simple models of the dissipation of intangible assets in international contractual arrangements. The first is concerned with technical knowledge dissipations and builds on Ethier and Markusen (1996) and Markusen (2001). The second outlines the notion that a licensing or franchising partner exploits the intangible asset ‘reputation’. For a certain period a foreign contractor is able to sell low quality products or services to local consumers that can only detect quality upon purchase. The consumers bear higher cost of buying the foreign brand product since it has the reputation of being of high quality. When the cheat is detected the local contractor has earned positive profits for the time of free-riding period and the MNE might have lost its reputation entailing also future losses. These ideas are found in Horstmann and Markusen (1987).
- 29.
For more information about these theoretical approaches see Mas-Colell et al. (1995).
- 30.
Idleness for example.
- 31.
Since sale effort is costly, a low level of efforts might be preferable for the agent since additional effort is not appropriately compensated by the contractual arrangement.
- 32.
For example Nocke and Yeaple (2008) report that on average firms engaging in GI are more efficient than the ones doing M&A. M&A are more likely the more developed the host country and the larger the geographical distance to the country of origin.
- 33.
This is discussed in the next subchapter (4.2).
- 34.
Even if not always explicitly noted, only cross-border M&A are discussed. Most of the discussed driving forces behind cross-border M&A also hold for the national context but the focus lies on international activities.
- 35.
As UNCTAD (2000) shows and explains that the major part of M&A is acquisition, the terminology acquirer and target instead of merger partners seems to be the appropriate one.
- 36.
Other examples are managerial synergies or the integration of pricing and marketing decisions (Neary 2007).
- 37.
Consider for example the intensive political and social discussion in Germany surrounding the takeover of the German construction company ‘Hochtief’ by the Spanish company ‘ACS’.
- 38.
He abstracts from synergies.
- 39.
- 40.
See inter alia Girma et al. (2005).
- 41.
The classical example is Silicon Valley.
- 42.
See also Kang and Johansson (2000) who highlight that the main driver of M&As instead of greenfield investment is the need to acquire complementary intangible assets as technology, know-how and brand names.
- 43.
The French government proposed to protect strategic industries from foreign takeovers in fear of Danone being acquired by PepsiCo (Bertrand et al. 2008).
- 44.
The UK government for example, subsidised Samsung by 30’000$ per employee to locate in the North of England (Girma et al. 2001).
- 45.
Ramachandran (1993) reports that more technology transfer is found for wholly-owned subsidiaries than for partially-owned ones. However, this does not distinguish between GI and outright acquisitions. Also Javorcik and Saggi (2010) show that MNEs with frontier technologies prefer wholly-owned subsidiaries as compared to JVs when entering the foreign market.
- 46.
This view has to be qualified in the subsequent discussion of spillovers to other domestic entities. It is precisely the fact of being associated with less sophisticated technology that makes M&A more favourable for the host country since domestic firms profit from knowledge diffusion more easily.
- 47.
A model that is somehow related to the discussion but rather concentrates on the growth effect of FDI as compared to licencing can be found in Glass and Saggi (2002). The authors show that if mode switching is permitted, FDI entails an increase in the rate and size of innovations since multinationals choose larger innovations than licensors due to ownership advantages that compensate for the costs of cross-country operations.
- 48.
- 49.
- 50.
Also called ‘technological’ or ‘real’ externalities.
- 51.
- 52.
Positive Schumpeterian long-run innovation incentives of competition are not accounted for.
- 53.
- 54.
See also Fosfuri et al. (2001).
- 55.
See also Rodriguez-Clare (1996). This is in line with the product variety approaches to Endogenous Growth Theory and discussed in Chaps. 2.2 and 3.2.
- 56.
Clustering is not only due to the presence of foreign MNE but a general phenomenon of industry allocation within countries. See for example Hagemann et al. (2011).
- 57.
Javorcik (2004) names for example the ISO (International Standards Organization) quality certifications.
- 58.
Just-in – time delivery or other supporting services.
- 59.
See Rodriguez-Clare (1996).
- 60.
The scale economies may either appear at the firm or the industry level. The latter should correctly be classified as non-pecuniary.
- 61.
- 62.
No matter if full, majority or minority acquisitions.
- 63.
This would have frozen imports at 1960s levels by quotas and limited the export of US-developed technology.
- 64.
This notion is picked up in practically all models of FDI, including the KC model, the models of vertical integration and PC- trade-off models of horizontal FDI.
- 65.
- 66.
UNCTAD (2005) focuses exactly on this development and evaluates the role played by MNE for this. Three empirical facts are prevailing in this regard. First, while still the R&D expenditure is geographically concentrated in developed countries, the share of developing countries is rising. Second, MNE are responsible for the major part of global R&D with a contribution of nearly 46 % of the world’s total R&D expenditures and 69 % of the world’s business R&D. And finally, the share of multinationals R&D activity abroad is rising. It is reported that R&D expenditures by US majority-owned foreign affiliates rose from 11.5 % to 13.3 % from 1994 to 2002, and for Swedish MNE affiliates even an increase from 22 % to 43 % in 1995 to 2003 was observed. Similar numbers can be shown for Germany, Italy, Japan and Spain. Even developing-country MNE are expanding their R&D activity abroad mainly focusing on having subsidiaries in developed countries as the US.
- 67.
- 68.
- 69.
- 70.
Balasubramanyam et al. (1996) test the efficiency part of the Bhagwati (1978)-hypothesis which states that the volume and efficacy of incoming FDI depends on whether a country follows an export promoting (EP) or an import substituting (IS) strategy. The EP strategy is likely to both attract a higher volume of FDI and promote more efficient utilisation. The reason is that EP is a neutral policy whereas the IS strategy is a distorting policy. The intention behind IS is to protect the domestic market and to attract FDI to serve the local market. Thus IS provides artificial and transitory incentives to FDI.
- 71.
- 72.
Alfaro et al. (2006) provide a model including some calibration exercises which show that financially well-developed economies have higher growth rates than other countries, that increases in the share of FDI leads to higher additional growth in financially developed economies, and that also other local conditions such as market structure and human capital are important for the effect of FDI on economic growth.
- 73.
Criscuolo (2005) additionally reports significant cross-country differences even within industrialised and less developed OEDC countries.
- 74.
- 75.
When it possesses the ‘social capability’ to catch up (Abramovitz 1986).
- 76.
She controls for the competition effect and for the clustering of standard errors.
- 77.
The problem with this study is that it proxies GI with full ownership which neglects the importance of outright or full acquisitions in the number of total acquisitions, and also misses the fundamental difference between full acquisition and GI: the local network that can be used by the former does not exist for the latter.
- 78.
Positive horizontal spillovers.
- 79.
The coincidence of service consumption and production in time and space.
- 80.
The US, Japan and 11 European countries.
- 81.
Providing further evidence for positive knowledge flows from inward FDI that was discussed before.
- 82.
- 83.
The leading inventor is located in the US.
- 84.
Or the share of an industry’s employees working for firms with a certain foreign equity threshold.
- 85.
Again the status of being multinational is more important than being foreign or not. Both for manufacturing and services, the difference between foreign MNEs and domestic MNEs is less pronounced than the gap between MNEs and non-MNEs.
- 86.
- 87.
While multinationals seem to be an elitist group no matter where they come from, Criscuolo and Martin (2009) show that US-owned plants have a significant productivity advantage relative to both British MNE and other foreign-owned plants, which shows superiority of US firms in a broad context. But their results also suggest that this productivity advantage is mainly due to stronger cherry-picking of US firms.
- 88.
- 89.
This technique is described in detail in Chap. 5.
- 90.
Criscuolo et al. (2010) define internationally or globally engaged firms as those entities that are multinational parents, multinational affiliates or exporting firms. The distinction between UK MNE affiliates and foreign MNE affiliates is not clear in this analysis as the focus lies more on the distinction of being multinational or not.
- 91.
For example the continuous monitoring principle within Kaizen.
References
Abramovitz, M. (1986). Catching up, forging ahead, and falling behind. Journal of Economic History, 46, 385–406.
Aghion, P., Bloom, N., Blundell, R., Griffith, R., & Howitt, P. (2005). Competition and innovation: An inverted-U relationship. The Quarterly Journal of Economics, 120, 701–728.
Aitken, B. J., & Harrison, A. E. (1999). Do domestic firms benefit from direct foreign investment? Evidence from Venezuela. American Economic Review, 89, 605–618.
Aitken, B. J., Harrison, A. E., & Lipsey, R. E. (1996). Wages and foreign ownership: A comparative study of Mexico, Venezuela, and the United States. Journal of International Economics, 40, 345–371.
Aitken, B. J., Hanson, G. H., & Harrison, A. E. (1997). Spillovers, foreign investment, and export behavior. Journal of International Economics, 43, 103–132.
Alfaro, L. (2003). Foreign direct investment and growth: Does the sector matter? Harvard Business School, Available at: http://www.people.hbs.edu/lalfaro/fdisectorial.pdf, Mimeo.
Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2004). FDI and economic growth: The role of local financial markets. Journal of International Economics, 64, 89–112.
Alfaro, L., Chanda, A., Kalemli-Ozcan, S., & Sayek, S. (2006). How does foreign direct investment promote economic growth? Exploring the effects of financial markets on linkages. NBER Working Paper 12522, National Bureau of Economic Research (NBER), Inc.
Ambos, B. (2005). Foreign direct investment in industrial research and development: A study of German MNCs. Research Policy, 34, 395–410.
Antras, P. (2003). Firms, contracts, and trade structure. The Quarterly Journal of Economics, 118, 1375–1418.
Antras, P., & Helpman, E. (2004). Global sourcing. Journal of Political Economy, 112, 552–580.
Aoki, M. (2001). Towards a comparative institutional analysis. Cambridge, MA: MIT Press.
Arnold, J. M., & Hussinger, K. (2010). Exports versus FDI in German manufacturing: Firm performance and participation in international markets. Review of International Economics, 18, 595–606.
Arnold, J. M., & Javorcik, B. S. (2009). Gifted kids or pushy parents? Foreign direct investment and plant productivity in Indonesia. Journal of International Economics, 79, 42–53.
Arnold, J. M., Javorcik, B. S., & Mattoo, A. (2007). Does services liberalization benefit manufacturing firms? Evidence from the Czech Republic. Policy Research Working Paper Series 4109, The World Bank.
Autor, D. H., Katz, L. F., & Kearney, M. S. (2008). Trends in U.S. wage inequality: Revising the revisionists. The Review of Economics and Statistics, 90, 300–323.
Balasubramanyam, V. N., Salisu, M., & Sapsford, D. (1996). Foreign direct investment and growth in EP and IS countries. Economic Journal, 106, 92–105.
Balasubramanyam, V. N., Salisu, M., & Sapsford, D. (1999). Foreign direct investment as an engine of growth. The Journal of International Trade and Economic Development, 8, 27–40.
Balsvik, R. (2011). Is labor mobility a channel for spillovers from multinationals? Evidence from Norwegian manufacturing. Review of Economics and Statistics, 93, 285–297.
Balsvik, R., & Haller, S. A. (2010). Picking “lemons” or picking “cherries”? Domestic and foreign acquisitions in Norwegian manufacturing. Scandinavian Journal of Economics, 112, 361–387.
Balsvik, R., & Haller, S. A. (2011). Foreign firms and host-country productivity: Does the mode of entry matter? Oxford Economic Papers, 63, 158–186.
Baltagi, B. H., Egger, P., & Pfaffermayr, M. (2007). Estimating models of complex FDI: Are there third-country effects? Journal of Econometrics, 140, 260–281.
Bandick, R., Görg, H., & Karpaty, P. (2010). Foreign acquisitions, domestic multinationals, and R&D. Kiel Working Papers 1651, Kiel Institute for the World Economy.
Barba Navaretti, G., & Venables, A. J. (2004): Multinational firms in the world economy. Princeton [i.a.]: Princeton University Press.
Barrios, S., Görg, H., & Strobl, E. (2003). Explaining firms’ export behaviour: R&D, spillovers and the destination market. Oxford Bulletin of Economics and Statistics, 65, 475–496.
Békés, G., Kleinert, J., & Toubal, F. (2009). Spillovers from multinationals to heterogeneous domestic firms: Evidence from Hungary. The World Economy, 32, 1408–1433.
Benfratello, L., & Sembenelli, A. (2006). Foreign ownership and productivity: Is the direction of causality so obvious? International Journal of Industrial Organization, 24, 733–751.
Bergstrand, J. H., & Egger, P. (2007). A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises. Journal of International Economics, 73, 278–308.
Bertrand, O. (2009). Effects of foreign acquisitions on R&D activity: Evidence from firm-level data for France. Research Policy, 38, 1021–1031.
Bertrand, O., & Zitouna, H. (2009). Efficiency gains and foreign takeovers: Remoteness matters. International Journal of Banking, Accounting and Finance, 1, 314–339.
Bertrand, O., & Zuniga, P. (2006). R&D and M&A: Are cross-border M&A different? An investigation on OECD countries. International Journal of Industrial Organization, 24, 401–423.
Bertrand, O., Nilsson Hakkala, K., Norbäck, P.-J., & Persson, L. (2008). Should R&D champions be protected from foreign takeovers? Working Paper Series 772, Research Institute of Industrial Economics.
Bhagwati, J. N. (1978). Anatomy and consequences of exchange control regimes. Cambridge, MA: Ballinger.
Blalock, G., & Gertler, P. J. (2008). Welfare gains from foreign direct investment through technology transfer to local suppliers. Journal of International Economics, 74, 402–421.
Blalock, G., & Gertler, P. J. (2009). How firm capabilities affect who benefits from foreign technology. Journal of Development Economics, 90, 192–199.
Blomstrom, M. (1986). Foreign investment and productive efficiency: The case of Mexico. Journal of Industrial Economics, 35, 97–110.
Blomstrom, M. (1992). Host country benefits of foreign investment. NBER Working Paper 3615, National Bureau of Economic Research (NBER), Inc.
Blomstrom, M., & Kokko, A. (1998). Multinational corporations and spillovers. Journal of Economic Surveys, 12, 247–277.
Blomstrom, M., Lipsey, R. E., & Zejan, M. (1994). What explains developing country growth? In W. J. Baumol, R. R. Nelson, & E. N. Wolff (Eds.), Convergence of productivity: Cross-national studies and historical evidence. Oxford: Oxford University Press.
Blonigen, B. A. (2005). A review of the empirical literature on FDI determinants. NBER Working Paper 11299, National Bureau of Economic Research (NBER), Inc.
Blonigen, B. A., Davies, R. B., & Head, K. (2003). Estimating the knowledge-capital model of the multinational enterprise: Comment. American Economic Review, 93, 980–994.
Blonigen, B. A., Davies, R. B., Waddell, G. R., & Naughton, H. T. (2007). FDI in space: Spatial autoregressive relationships in foreign direct investment. European Economic Review, 51, 1303–1325.
Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45, 115–135.
Bosco, M. (2001). Does FDI contribute to technological spillovers and growth? A panel data analysis of Hungarian firms. Transnational Corporations, 10, 43–68.
Braconier, H., Norbäck, P.-J., & Urban, D. (2005). Reconciling the evidence on the knowledge-capital model. Review of International Economics, 13, 770–786.
Brainard, S. L. (1993a). An empirical assessment of the factor proportions explanation of multi-national sales. NBER Working Paper 4583, National Bureau of Economic Research (NBER), Inc.
Brainard, S. L. (1993b). A simple theory of multinational corporations and trade with a trade-off between proximity and concentration. NBER Working Paper 4269, National Bureau of Economic Research (NBER), Inc.
Brainard, S. L. (1997). An empirical assessment of the proximity concentration tradeoff between multinational sales and trade. American Economic Review, 87, 520–544.
Branstetter, L. G. (2000). Is foreign direct investment a channel of knowledge spillovers? Evidence from Japan’s FDI in the United States. NBER Working Paper 8015, National Bureau of Economic Research (NBER), Inc.
Branstetter, L. G., Fisman, R., & Foley, C. F. (2006). Do stronger intellectual property rights increase international technology transfer? Empirical evidence from U. S. firm-level panel data. The Quarterly Journal of Economics, 121, 321–349.
Carkovic, M., & Levine, R. (2005). How does FDI affect host country development? Using industry case studies to make reliable generalizations. In T. H. Moran, E. M. Graham, & M. Blomström (Eds.), Does foreign direct investment promote development? Washington, DC: Institute for International Economics.
Carr, D. L., Markusen, J. R., & Maskus, K. E. (2001). Estimating the knowledge-capital model of the multinational enterprise. American Economic Review, 91, 693–708.
Carr, D. L., Markusen, J. R., & Maskus, K. E. (2003). Estimating the knowledge-capital model of the multinational enterprise: Reply. American Economic Review, 93, 995–1001.
Cassiman, B., Colombo, M. G., Garrone, P., & Veugelers, R. (2005). The impact of M&A on the R&D process: An empirical analysis of the role of technological- and market-relatedness. Research Policy, 34, 195–220.
Castellani, D. (2002). Export behavior and productivity growth: Evidence from Italian manufacturing firms. Review of World Economics (Weltwirtschaftliches Archiv), 138, 605–628.
Caves, R. E. (2007). Multinational enterprise and economic analysis. Cambridge [i.a.]: Cambridge University Press.
Chen, W. (2011). The effect of investor origin on firm performance: Domestic and foreign direct investment in the United States. Journal of International Economics, 83, 219–228.
Chowdhury, A., & Mavrotas, G. (2006). FDI and growth: What causes what? The World Economy, 29, 9–19.
Coase, R. (1937). The nature of the firm. Economica, 4, 386–405.
Conyon, M. J., Girma, S., Thompson, S., & Wright, P. (2002). The productivity and wage effects of foreign acquisition in the United Kingdom. Journal of Industrial Economics, 50, 85–102.
Coughlin, C. C., & Segev, E. (2000). Foreign direct investment in China: A spatial econometric study. The World Economy, 23, 1–23.
Criscuolo, C. (2005). The contribution of foreign affiliates to productivity growth : Evidence from OECD countries. OECD Science, Technology and Industry Working Papers 2005/8, OECD Publishing.
Criscuolo, C., & Martin, R. (2009). Multinationals and U.S. productivity leadership: Evidence from Great Britain. The Review of Economics and Statistics, 91, 263–281.
Criscuolo, C., Haskel, J. E., & Slaughter, M. J. (2010). Global engagement and the innovation activities of firms. International Journal of Industrial Organization, 28, 191–202.
Damijan, J. P., Knell, M., Majcen, B., & Rojec, M. (2003). The role of FDI, R&D accumulation and trade in transferring technology to transition countries: Evidence from firm panel data for eight transition countries. Economic Systems, 27, 189–204.
Das, S. (1987). Externalities and technology transfer through multinational corporations: A theoretical analysis. Journal of International Economics, 22, 171–182.
Davies, R. B. (2008). Hunting high and low for vertical FDI. Review of International Economics, 16, 250–267.
Djankov, S., & Hoekman, B. M. (2000). Foreign investment and productivity growth in Czech enterprises. World Bank Economic Review, 14, 49–64.
Doms, M. E., & Jensen, J. B. (1998). Comparing wages, skills, and productivity between domestically and foreign-owned manufacturing establishments in the United States. In R. E. Baldwin, R. E. Lipsey, & J. D. Richards (Eds.), Geography and ownership as bases for economic accounting (pp. 235–258). Chicago: University of Chicago Press.
Driffield, N., Munday, M., & Roberts, A. (2002). Foreign direct investment, transactions linkages, and the performance of the domestic sector. International Journal of the Economics of Business, 9, 335–351.
Dunning, J. H. (1977). Trade, location of economic activity, and the MNE: A search for an eclectic approach. In B. Ohlin, P. O. Hesselborn, & P. M. Wijkman (Eds.), The international allocation of economic activity (pp. 395–418). London: Macmillan.
Dunning, J. H. (1988). The eclectic paradigm of international production: A restatement and some possible extensions. Journal of International Business Studies, 19, 1–31.
Dunning, J. H. (1993). The theory of transnational corporations. The United Nations Library on Transnational Corporations (Vol. 1). London [i.a.]: Routledge.
Durham, J. B. (2000). A survey of the econometric literature on the real effects of international capital flows in lower income countries. QEH Working Papers 50, Queen Elizabeth House, University of Oxford.
Edler, J., Meyer-Krahmer, F., & Reger, G. (2002). Changes in the strategic management of technology: Results of a global benchmark survey. R&D Management, 32, 149–164.
Egger, P., Larch, M., & Pfaffermayr, M. (2004). Multilateral trade and investment liberalization: Effects on welfare and GDP per capita convergence. Economics Letters, 84, 133–140.
Ekholm, K., Forslid, R., & Markusen, J. R. (2007). Export-platform foreign direct investment. Journal of the European Economic Association, 5, 776–795.
Ethier, W. J. (1986). The multinational firm. The Quarterly Journal of Economics, 101, 805–833.
Ethier, W. J., & Markusen, J. R. (1996). Multinational firms, technology diffusion and trade. Journal of International Economics, 41, 1–28.
Evenett, S., & Voicu, A. (2003). Picking winners or creating them? Revising the benefits of FDI in the Czech Republic. Oxford University, Mimeo.
Fosfuri, A., Motta, M., & Rønde, T. (2001). Foreign direct investment and spillovers through workers’ mobility. Journal of International Economics, 53, 205–222.
Freeman, R. B. (2006). Is a great labor shortage coming? Replacement demand in the global economy. NBER Working Paper 12541, National Bureau of Economic Research (NBER), Inc.
Girma, S. (2005). Technology transfer from acquisition FDI and the absorptive capacity of domestic firms: An empirical investigation. Open Economies Review, 16, 175–187.
Girma, S., & Görg, H. (2007). Multinationals’ productivity advantage: Scale or technology? Economic Inquiry, 45, 350–362.
Girma, S., Greenaway, D., & Wakelin, K. (2001). Who benefits from foreign direct investment in the UK? Scottish Journal of Political Economy, 48, 119–133.
Girma, S., Görg, H., & Strobl, E. (2004a). Exports, international investment, and plant performance: Evidence from a non-parametric test. Economics Letters, 83, 317–324.
Girma, S., Kneller, R., & Pisu, M. (2005). Exports versus FDI: An empirical test. Review of World Economics (Weltwirtschaftliches Archiv), 141, 193–218.
Glass, A. J., & Saggi, K. (2002b). Multinational firms and technology transfer. Scandinavian Journal of Economics, 104, 495–513.
Görg, H., & Greenaway, D. (2004). Much ado about nothing? Do domestic firms really benefit from foreign direct investment? World Bank Research Observer, 19, 171–197.
Görg, H., & Strobl, E. (2005). Spillovers from foreign firms through worker mobility: An empirical investigation. Scandinavian Journal of Economics, 107, 693–709.
Greenaway, D. (2004). The assessment: Firm-level adjustment to globalization. Oxford Review of Economic Policy, 20, 335–342.
Greenaway, D., & Kneller, R. (2007). Firm heterogeneity, exporting and foreign direct investment. Economic Journal, 117, F134–F161.
Greenaway, D., Sousa, N., & Wakelin, K. (2004). Do domestic firms learn to export from multinationals? European Journal of Political Economy, 20, 1027–1043.
Griffith, R. (1999a). Productivity and foreign ownership in the UK car industry. IFS Working Papers W99/11, Institute for Fiscal Studies.
Griffith, R. (1999b). Using the ARD establishment level data to look at foreign ownership and productivity in the United Kingdom. Economic Journal, 109, F416–F442.
Griffith, R., & Simpson, H. (2004). Characteristics of foreign-owned firms in British manufacturing. In D. Card, R. Blundell, & R. B. Freeman (Eds.), Seeking a premier economy: The economic effects of British economic reforms, 1980–2000 (pp. 147–180). Chicago: University of Chicago Press.
Griffith, R., Redding, S., & Simpson, H. (2004b). Foreign ownership and productivity: New evidence from the service sector and the R&D lab. Oxford Review of Economic Policy, 20, 440–456.
Griffith, R., Harrison, R., & Reenen, J. V. (2006). How special is the special relationship? Using the impact of U.S. R&D spillovers on U.K. firms as a test of technology sourcing. American Economic Review, 96, 1859–1875.
Grossman, S. J., & Hart, O. D. (1986). The costs and benefits of ownership: A theory of vertical and lateral integration. Journal of Political Economy, 94, 691–719.
Grossman, G. M., & Helpman, E. (2002). Integration versus outsourcing in industry equilibrium. The Quarterly Journal of Economics, 117, 85–120.
Grossman, G. M., & Helpman, E. (2003). Outsourcing versus FDI in industry equilibrium. Journal of the European Economic Association, 1, 317–327.
Grossman, G. M., Helpman, E., & Szeidl, A. (2006). Optimal integration strategies for the multinational firm. Journal of International Economics, 70, 216–238.
Grout, P. A. (1984). Investment and wages in the absence of binding contracts: A Nash bargaining approach. Econometrica, 52, 449–460.
Guadalupe, M., Kuzmina, O., & Thomas, C. (2010). Innovation and foreign ownership. NBER Working Paper 16573, National Bureau of Economic Research (NBER), Inc.
Hagemann, H., Christ, J. Erber, G., & Rukwid, R. (2011). Die Bedeutung von Innovationsclustern, sektoralen und regionalen Innovationssystemen zur Stärkung der globalen Wettbewerbsfähigkeit der baden-württembergischen Wirtschaft. Final report, University of Hohenheim, Stuttgart-Hohenheim.
Hanson, G. H., Mataloni, R. J., Jr., & Slaughter, M. J. (2001). Expansion strategies of U.S. multinational firms. In D. Rodrik & S. Collins (Eds.), Brookings trade forum 2001 (pp. 245–294).
Harris, R. (2002). Foreign ownership and productivity in the United Kingdom – Some issues when using the ARD establishment level data. Scottish Journal of Political Economy, 49, 318–335.
Harris, R., & Robinson, C. (2003). Foreign ownership and productivity in the United Kingdom estimates for U.K. manufacturing using the ARD. Review of Industrial Organization, 22, 207–223.
Hart, O., & Moore, J. (1990). Property rights and the nature of the firm. Journal of Political Economy, 98, 1119–1158.
Haskel, J. E., Pereira, S. C., & Slaughter, M. J. (2007). Does inward foreign direct investment boost the productivity of domestic firms? The Review of Economics and Statistics, 89, 482–496.
Head, K., & Ries, J. (2003). Heterogeneity and the FDI versus export decision of Japanese manufacturers. Journal of the Japanese and International Economies, 17, 448–467.
Head, K., & Ries, J. (2004). Exporting and FDI as alternative strategies. Oxford Review of Economic Policy, 20, 409–423.
Helpman, E. (1984). A simple theory of international trade with multinational corporations. Journal of Political Economy, 92, 451–471.
Helpman, E. (1985). Multinational corporations and trade structure. Review of Economic Studies, 52, 443–457.
Helpman, E., & Krugman, P. (1985). Market structure and foreign trade. Cambridge, MA [i.a.]: MIT Press.
Helpman, E., Melitz, M. J., & Yeaple, S. R. (2004). Export versus FDI with heterogeneous firms. American Economic Review, 94, 300–316.
Hering, L., Inui, T., & Py, L. (2011). Overseas R&D and performance abroad: Evidence from Japanese multinational firms. Mimeo.
Horstmann, I. J., & Markusen, J. R. (1987). Licensing versus direct investment: A model of internalization by the multinational enterprise. Canadian Journal of Economics, 20, 464–481.
Horstmann, I. J., & Markusen, J. R. (1996). Exploring new markets: Direct investment, contractual relations and the multinational enterprise. International Economic Review, 37, 1–19.
Howenstine, N. G., & Zeile, W. J. (1994). Characteristics of foreign-owned U.S. manufacturing establishments. Survey of Current Business, 74, 34–59.
Huizinga, H. (1995). Taxation and the transfer of technology by multinational firms. Canadian Journal of Economics, 28, 648–655.
Iwasa, T., & Odagiri, H. (2002). The role of overseas R&D activities in technological knowledge sourcing: An empirical study of Japanese R&D investment in the US. Discussion Paper 23, National Institute of Science and Technology Policy.
Jaffe, A. (1986). Technological opportunity and spillovers of R&D: Evidence from firms’ patents, profits and market value. American Economic Review, 75, 984–1002.
Jaffe, A. B., Trajtenberg, M., & Henderson, R. (1993). Geographic localization of knowledge spillovers as evidenced by patent citations. The Quarterly Journal of Economics, 108, 577–598.
Javorcik, B. S. (2004). Does foreign direct investment increase the productivity of domestic firms? In search of spillovers through backward linkages. American Economic Review, 94, 605–627.
Javorcik, B. S. (2008). Can survey evidence shed light on spillovers from foreign direct investment? World Bank Research Observer, 23, 139–159.
Javorcik, B. S. (2010). Foreign direct investment and international technology transfer. in Encyclopaedia of financial globalization.
Javorcik, B. S., & Saggi, K. (2010). Technological asymmetry among foreign investors and mode of entry. Economic Inquiry, 48, 415–433.
Javorcik, B. S., & Spatareanu, M. (2005). Disentangling FDI spillover effects: What do firm perceptions tell us? In T. H. Moran, E. M. Graham, & M. Blomstrom (Eds.), Does foreign direct investment promote development? Washington, DC: Institute for International Economics.
Javorcik, B. S., & Spatareanu, M. (2008). To share or not to share: Does local participation matter for spillovers from foreign direct investment? Journal of Development Economics, 85, 194–217.
Javorcik, B. S., & Spatareanu, M. (2011). Does it matter where you come from? Vertical spillovers from foreign direct investment and the origin of investors. Journal of Development Economics, 96, 126–138.
Jensen, J. B., & Kletzer, L. G. (2005). Tradable services: Understanding the scope and impact of services offshoring. Brookings Trade Forum Offshoring White-Collar Work, The Brookings Institution.
Jones, G. K., & Teegen, H. J. (2001). Global R&D activity of U.S. MNCs: Does national culture affect investment decisions? Multinational Business Review, 9, 1–7.
Jovanovic, B., & Rousseau, P. L. (2008). Mergers as reallocation. The Review of Economics and Statistics, 90, 765–776.
Kang, N.-H., & Johansson, S. (2000). Cross-border mergers and acquisitions: Their role in industrial globalisation. OECD Science, Technology and Industry Working Papers 2000/1, OECD Publishing.
Karimi, M. S., & Yusop, Z. (2009). FDI and economic growth in Malaysia. MPRA Paper 14999, University Library of Munich.
Karpaty, P. (2007). Productivity effects of foreign acquisitions in Swedish manufacturing: The FDI productivity issue revisited. International Journal of the Economics of Business, 14, 241–260.
Keller, W. (2002b). Trade and the transmission of technology. Journal of Economic Growth, 7, 5–24.
Keller, W. (2004). International technology diffusion. Journal of Economic Literature, 42, 752–782.
Keller, W. (2009). International trade, foreign direct investment, and technology spillovers. NBER Working Paper 15442, National Bureau of Economic Research (NBER), Inc.
Keller, W., & Yeaple, S. R. (2008). Global production and trade in the knowledge economy. NBER Working Paper 14626, National Bureau of Economic Research (NBER), Inc.
Keller, W., & Yeaple, S. R. (2009). Multinational enterprises, international trade, and productivity growth: Firm-level evidence from the United States. The Review of Economics and Statistics, 91, 821–831.
Kneller, R., & Pisu, M. (2004). Export-oriented FDI in the UK. Oxford Review of Economic Policy, 20, 424–439.
Kogut, B., & Chang, S. J. (1991). Technological capabilities and Japanese foreign direct investment in the United States. Review of Economics and Statistics, 73, 401–413.
Konings, J. (2001). The effect of direct foreign investment on domestic firms: Evidence from firm-level panel data in emerging economies. Economics of Transition, 9, 619–633.
Lichtenberg, F. R., & Van Pottelsberghe De La Potterie, B. (2001). Does foreign direct investment transfer technology across borders? The Review of Economics and Statistics, 83, 490–497.
Lipsey, R. E. (2002). Home and host country effects of FDI. NBER Working Paper 9293, National Bureau of Economic Research (NBER), Inc.
Lipsey, R. E. (2003). Foreign direct investments and the operations of multinational firms: Concepts, history and data. In E. K. Choi & J. Harrigan (Eds.), Handbook of international trade. Malden: Blackwell Publishing.
Markusen, J. R. (1984). Multinationals, multi-plant economies, and the gains from trade. Journal of International Economics, 16, 205–226.
Markusen, J. R. (1995). The boundaries of multinational enterprises and the theory of international trade. Journal of Economic Perspectives, 9, 169–189.
Markusen, J. R. (1997). Trade versus investment liberalization. NBER Working Papers 6231, National Bureau of Economic Research (NBER), Inc.
Markusen, J. R. (2001). Contracts, intellectual property rights, and multinational investment in developing countries. Journal of International Economics, 53, 189–204.
Markusen, J. R. (2002). Multinational firms and the theory of international trade. Cambridge, MA: MIT Press.
Markusen, J. R. (2008). Foreign direct investment. In R. S. Rajan and K. A. Reinert (Eds.), Princeton encyclopaedia of the world economy, Princeton University Press.
Markusen, J. R. and K. E. Maskus (2001). Multinational firms: Reconciling theory and evidence. In Topics in empirical international economics: A festschrift in honor of Robert E. Lipsey (pp. 71–98). National Bureau of Economic Research, Inc., NBER Chapters.
Markusen, J. R., & Maskus, K. E. (2002). Discriminating among alternative theories of the multinational enterprise. Review of International Economics, 10, 694–707.
Markusen, J. R., & Venables, A. J. (2000). The theory of endowment, intra-industry and multi-national trade. Journal of International Economics, 52, 209–234.
Markusen, J. R., Venables, A. J., Konan, D. E., & Zhang, K. H. (1996). A unified treatment of horizontal direct investment, vertical direct investment, and the pattern of trade in goods and services. NBER Working Paper 5696, National Bureau of Economic Research (NBER), Inc.
Mas-Colell, A., Whinston, M. D., & Green, J. R. (1995). Microeconomic theory. Oxford: Oxford University Press.
Mathä, T. (2002). The single European market, Swedish investment liberalisation, and horizontal and vertical multinationals. EIJS Working Paper Series 147, The European Institute of Japanese Studies.
Mayer, T., & Ottaviano, G. I. P. (2007). The happy few: The internationalisation of European firms. Bruessels: Bruegel Blueprint Series.
Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71, 1695–1725.
Moran, T. H. (2001). Parental supervision: The new paradigm for foreign direct investment and development. Washington, DC: Peterson Institute for International Economics.
Mundell, R. (1957). International trade and factor mobility. American Economic Review, 47, 321–335.
Neary, J. P. (2003). Presidential address: Globalization and market structure. Journal of the European Economic Association, 1, 245–271.
Neary, J. P. (2007). Cross-border mergers as instruments of comparative advantage. Review of Economic Studies, 74, 1229–1257.
Neary, J. P. (2008). Foreign direct investment: The OLI framework. In R. S. Rajan & K. A. Reinert (Eds.), Princeton encyclopaedia of the world economy. Princeton: Princeton University Press.
Neary, J. P. (2009). International trade in general oligopolistic equilibrium. CESifo. Nelson, R. R. and E. S. Phelps (1966). Investment in humans, technological diffusion, and economic growth. The American Economic Review, 56, 69–75.
Nocke, V., & Yeaple, S. (2007). Cross-border mergers and acquisitions vs. greenfield foreign direct investment: The role of firm heterogeneity. Journal of International Economics, 72, 336–365.
Nocke, V., & Yeaple, S. (2008). An assignment theory of foreign direct investment. Review of Economic Studies, 75, 529–557.
North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge: Cambridge University Press.
North, D. C. (1998). The rise of the Western World. In P. Bernholz, M. E. Streit, & R. Vaubel (Eds.), Political competition, innovation and growth: A historical analysis (pp. 13–28). Berlin: Springer.
North, D. C., & Thomas, R. P. (1973). The rise of the Western World: A new economic history. Cambridge: Cambridge University Press.
OECD, & Belgian Science Policy. (2005). Internationalisation of R&D: Trends, issues and implications for S&T policies: A review of the literature. Background Report for the Forum on the Internationalisation of R&D, Brussels, 29–30 March.
Olley, G. S., & Pakes, A. (1996). The dynamics of productivity in the telecommunications equipment industry. Econometrica, 64, 1263–1297.
Ornelas, E., & Turner, J. L. (2008). Trade liberalization, outsourcing, and the hold-up problem. Journal of International Economics, 74, 225–241.
Ozturk, I. (2007). Foreign direct investment – growth nexus: A review of recent lit. International Journal of Applies Econometrics and Quantitive Studies, 4, 79–98.
Pavcnik, N. (2002). Trade liberalization, exit, and productivity improvement: Evidence from Chilean plant. Review of Economic Studies, 69, 245–276.
Poole, J. P. (2011). Knowledge transfers from multinational to domestic firms: Evidence from worker mobility, Forthcoming review of economics and statistics, University of California, Santa Cruz.
Ramachandran, V. (1993). Technology transfer, firm ownership, and investment in human capital. The Review of Economics and Statistics, 75, 664–670.
Roberts, E. B. (2001). Benchmarking global strategic management of technology. Research Technology Management, 44, 25–36.
Rodriguez-Clare, A. (1996). Multinationals, linkages, and economic development. American Economic Review, 86, 852–873.
Rodrik, D. (1999). The new global economy and developing countries: Making openness work. Washington, DC: Overseas Development Council.
Saggi, K. (2002). Trade, foreign direct investment, and international technology transfer: A survey. World Bank Research Observer, 17, 191–235.
Singh, J. (2007). Asymmetry of knowledge spillovers between MNCs and host country firms. Journal of International Business Studies, 38, 764–786.
Stancik, J. (2009). FDI spillovers in the Czech Republic: Takeovers vs. greenfields. European Economy – Economic Papers 369, Directorate General Economic and Monetary Affairs, European Commission.
Stiebale, J., & Reize, F. (2011). The impact of FDI through mergers and acquisitions on innovation in target firms. International Journal of Industrial Organization, 29, 155–167.
Todo, Y., & Shimizutani, S. (2008). Overseas R&D activities and home productivity growth: Evidence from Japanese firm-level data. The Journal of Industrial Economics, 56, 752–777.
Tomiura, E. (2007). Foreign outsourcing, exporting, and FDI: A productivity comparison at the firm-level. Journal of International Economics, 72, 113–127.
UNCTAD. (2005). World investment report 2005: Transnational corporations and the internationalization of R&D. United Nations Conference on Trade and Development (UNCTAD), New York and Geneva: United Nations Publications.
Veugelers, R., & Cassiman, B. (2004). Foreign subsidiaries as a channel of international technology diffusion: Some direct firm-level evidence from Belgium. European Economic Review, 48, 455–476.
Wagner, J. (2006a). Exports, foreign direct investment, and productivity: Evidence from German firm-level data. Applied Economics Letters, 13, 347–349.
Wang, J.-Y., & Blomström, M. (1992). Foreign investment and technology transfer: A simple model. European Economic Review, 36, 137–155.
Williamson, O. E. (1979). Transaction-cost economics: The governance of contractual relations. Journal of Law and Economics, 22, 233–261.
Xu, B. (2000). Multinational enterprises, technology diffusion, and host country productivity growth. Journal of Development Economics, 62, 477–493.
Yamawaki, H. (1994). International competitiveness and the choice of entry mode: Japanese multinationals in US and European manufacturing. Working Paper 424, The Industrial Institute for Economic and Social Research, Stockholm.
Yeaple, S. R. (2003a). The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment. Journal of International Economics, 60, 293–314.
Yeaple, S. R. (2003b). The role of skill endowments in the structure of U.S. outward foreign direct investment. The Review of Economics and Statistics, 85, 726–734.
UNCTAD. (2000). World Investment Report 2000 cross-border mergers and acquisitions and development. United Nations Conference on Trade and Development (UNCTAD). New York and Geneva: United Nations Publications.
De Mello, L. R., Junior. (1999). Foreign direct investment-led growth: Evidence from times series and panel data. Oxford Economic Papers, 51, 133–151.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2013 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Hofmann, P. (2013). The Impact of FDI on Technological Change and Long-Run Growth. In: The Impact of International Trade and FDI on Economic Growth and Technological Change. Contributions to Economics. Physica, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-34581-4_4
Download citation
DOI: https://doi.org/10.1007/978-3-642-34581-4_4
Published:
Publisher Name: Physica, Berlin, Heidelberg
Print ISBN: 978-3-642-34580-7
Online ISBN: 978-3-642-34581-4
eBook Packages: Business and EconomicsEconomics and Finance (R0)