Which Countries Export FDI, and How Much?

02/2004; DOI: 10.2139/ssrn.1009013
Source: RePEc

ABSTRACT The paper provides a reconciliation of Lucas' paradox, based on fixed setup costs of new investments. With such costs, it does not pay a firm to make a "small" investment, even though such an investment is called for by marginal productivity conditions. Using a sample of 45 developed and developing countries we estimate jointly the participation equation (the decision whether to invest at all) and the FDI flow equation (the decision how much to invest). We find that countries which are more likely to serve as source for FDI exports than their characteristics project export lower flow of FDI than is predicted by their characteristics. This negative correlation suggests that the source countries with relatively low setup costs are also those with high marginal productivity of capital

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    ABSTRACT: The objective of this paper is to examine the substitution between aid flows and the flows of foreign direct investment (FDI) between in some Heav- ily indebted poor countries. I use data running over 34 years from 1970 to 2004. I analyse this by means of simultaneous equiations system, allowing me to determine the substitutability between foreign direct investment and aid. Due to the small scale of flows, the model is analyzed with an inverse hy- perbolic sine function rather than a logarithmic function. Findings indicate that as the HIPC countries income grows, there is a shift from complemen- tary to substitutional effects between aid flows and FDI.
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    ABSTRACT: Purpose – The purpose of this paper is to seek a clearer understanding of how firms involved in power intensive industries participate in foreign direct investment. The paper asks the following questions: how skilled are the employees available for hire? What kind of pollution restrictions will be applied to the plant? Is the infrastructure in place to enable free transport of the necessary materials? All of these are factors that can be analyzed on a national level, and are major factors in government policy. Design/methodology/approach – The research is designated to explain how macro policy can be directed towards firms in the power intensive industry, to impact the competitiveness within the industry. Skilled labor differences is reflecting governmental policy in its willingness to contribute to education. Infrastructure can be viewed as an indicator for long-term policy planning by the government. The pollution variable reflects on macro policy emphasis by governments, by presenting their emission targets. Investment cost variable gives indication of government policy concerning the ease with which foreign investors can enter into and invest in a particular country. The case country is Iceland, an isolated island that is unable to export its abundance directly and therefore must do so through foreign direct investment. Findings – The findings indicate that source countries are attracted by the level of skill in Iceland at the beginning stage of operations when faced with fixed threshold cost. Once the plants have overcome fixed costs, there are positive impacts on marginal investment, the more skilled the source country is compared to the host. Other factors that proved to be important in this case study are distance, infrastructure, government stability, pollution quotas, and the fishing resource. Originality/value – The relative friendliness a country's policies display towards an industry can make a huge difference when it comes to how successful a business can be, so studying these national-level policies can help an individual determine what kind of direction to take on the day-to-day operational decisions.
    International Journal of Energy Sector Management 04/2012; 6(1):91-119.
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    ABSTRACT: This study examines the determinants of Turkish outward FDI employing a gravity model. The model estimates the impact of traditional gravity variables, as well as openness, labour productivity, infrastructure, institutions and economic stability on FDI outflows from Turkey to 11 countries, which account for approximately 90% of Turkish outward FDI stock, over the period 1999-2005 years using panel data random effects technique. The results reveal that Turkish FDI has a market-seeking pattern with foreign markets being substituted for domestic market by Turkish firms. On the other hand, economic instability in Turkey emerges as a major deterrent of FDI outflows. Additionally, our results suggest the possibility of FDI in vertically differentiated products in host countries by Turkish investors as well as the importance of push factors.

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