Foreign Direct Investment Communities and the Legitimation of Wholly-Owned Foreign Subsidiaries in China

This chapter constructs a dynamic model of a multinational enterprise (MNE) to quantify the effects of various capital control policies on a firm’s debt and equity positions, innovations, and outputs at the headquarters and subsidiary. The model is calibrated to the US Foreign Direct Investment (FDI) Benchmark Survey and the IMF’s Exchange Arrangements and Exchange Restrictions so that it reproduces the average US FDI and technology flows to foreign subsidiaries. Both steady-state and transition analyses suggest a significant impact of capital controls on an MNE’s operations. Lifting capital restrictions produces an inflow of capital and technology into the less developed countries, leading to an increase in the steady-state FDI position and production. Simulation experiments reveal that even short-term capital controls have long-lasting negative effects.

Download Full-text

Capital Controls and Firm's Dynamics

Computational Economics ◽

10.4018/978-1-59140-649-5.ch013 ◽

2011 ◽

pp. 235-267

Author(s):

Alexei G. Orlov

Keyword(s):

Foreign Direct Investment ◽

Steady State ◽

Direct Investment ◽

Multinational Enterprise ◽

Capital Controls ◽

Developed Countries ◽

Foreign Subsidiaries ◽

Capital Control ◽

Negative Effects ◽

The Us

This chapter constructs a dynamic model of a multinational enterprise (MNE) to quantify the effects of various capital control policies on a firm’s debt and equity positions, innovations, and outputs at the headquarters and subsidiary. The model is calibrated to the US Foreign Direct Investment (FDI) Benchmark Survey and the IMF’s Exchange Arrangements and Exchange Restrictions so that it reproduces the average US FDI and technology flows to foreign subsidiaries. Both steady-state and transition analyses suggest a significant impact of capital controls on an MNE’s operations. Lifting capital restrictions produces an inflow of capital and technology into the less developed countries, leading to an increase in the steady-state FDI position and production. Simulation experiments reveal that even short-term capital controls have long-lasting negative effects.

Download Full-text

Technology Capital and the US Current Account

The American Economic Review ◽

10.1257/aer.100.4.1493 ◽

2010 ◽

Vol 100 (4) ◽

pp. 1493-1522 ◽

Cited By ~ 68

Author(s):

Ellen R McGrattan ◽

Edward C Prescott

Keyword(s):

Foreign Direct Investment ◽

Equilibrium Model ◽

Direct Investment ◽

Essential Role ◽

Multinational Companies ◽

Foreign Subsidiaries ◽

Economic Statistics ◽

Intangible Investments ◽

The Us ◽

The Difference

The US Bureau of Economic Analysis (BEA) estimates that the return on investments of foreign subsidiaries of US multinational companies over the period 1982–2006 averaged 9.4 percent annually after taxes; US subsidiaries of foreign multinationals averaged only 3.2 percent. BEA returns on foreign direct investment (FDI) are distorted because most intangible investments made by multinationals are expensed. We develop a multicountry general equilibrium model with an essential role for FDI and apply the BEA's methodology to construct economic statistics for the model economy. We estimate that mismeasurement of intangible investments accounts for over 60 percent of the difference in BEA returns. (JEL F23, F32)

Download Full-text

Local cooperation for innovation in ICT—Domestic groups with collaborations for innovation abroad and foreign subsidiaries

Science and Public Policy ◽

10.1093/scipol/scz013 ◽

2019 ◽

Vol 46 (4) ◽

pp. 599-610

Author(s):

Adelheid Holl ◽

Ruth Rama

Keyword(s):

Foreign Direct Investment ◽

International Cooperation ◽

Information And Communication Technology ◽

Communication Technology ◽

Direct Investment ◽

Home Market ◽

Foreign Subsidiaries ◽

Investment Promotion ◽

Information And Communication ◽

Ict Companies

Abstract On analysing a sample of Information and Communication Technology (ICT) firms, we ask whether domestic business groups that are engaged in international cooperation for innovation are likely to cooperate for innovation in the home market. We compare these companies with other types of ICT firms. The idea behind our inquiry is that domestic groups involved in international cooperation for innovation are exposed to international information, while they are also well embedded in the home economy. We find that these companies as well as foreign subsidiaries are more prone to cooperating for innovation with domestic partners than are other types of ICT companies, even when size and other characteristics of firms that may influence cooperation are taken into consideration. However, domestic groups with international cooperation for innovation show a systematically higher propensity than foreign subsidiaries to cooperate with domestic partners. These results may be useful regarding policies of foreign direct investment promotion and their alternatives.

Download Full-text

The spatial distribution of foreign direct investment in R&D within host countries. An empirical examination of foreign subsidiaries in Spain

International Journal of Multinational Corporation Strategy ◽

10.1504/ijmcs.2016.076663 ◽

2016 ◽

Vol 1 (1) ◽

pp. 65

Author(s):

Adelheid Holl ◽

Ruth Rama

Keyword(s):

Foreign Direct Investment ◽

Spatial Distribution ◽

Direct Investment ◽

Foreign Subsidiaries ◽

Host Countries ◽

Empirical Examination

Download Full-text

The relationship between foreign direct investment and GDP in Cameroon (2000–2020)

R-Economy ◽

10.15826/recon.2021.7.3.018 ◽

2021 ◽

Vol 7 (3) ◽

pp. 200-209

Author(s):

Levis Petiho Numbu ◽

◽

Zhanna S. Belyaeva ◽

◽

Keyword(s):

Economic Growth ◽

Foreign Direct Investment ◽

Direct Investment ◽

Foreign Firms ◽

Foreign Subsidiaries ◽

Correlation And Regression Analysis ◽

Policy And Strategy ◽

New Business ◽

The Government ◽

The Relationship

Relevance. In the last 20 years Cameroon has faced a series of crises. The 2035 governmental programme of recovery aims to transform the country into an emerging economy nation. The effects of the COVID-19 pandemic have slowed down economic growth in Cameroon and the country is hoping to attract foreign direct investment (FDI) and thus benefit from the new business opportunities to revitalize its economy. This context makes the research on the relationship between FDI and GDP particularly relevant. Research objective. This paper is designed to assess the relationship between GDP and FDI in Cameroon in 2000-2020. In addition, we aim to assess the scope of internationalization through FDI as a possible catalyst for economic recovery. Data and methods. The paper uses correlation and regression analysis to show the relationship between FDI and GDP. Results. The results show that FDI can increase Cameroon’s GDP and may be used as an empirical basis for policy- and strategy-making in Cameroon. Conclusions. We found a strong correlation between FDI and GDP in Cameroon for a 21-year period. This result is supported by the double effect of FDI on the national economy: FDI directly affects the investment component of GDP, but it also influences economic growth indirectly. The activities of foreign firms in Cameroon can support trade and even balance of payment, which indirectly influences the export and import component of GDP. Foreign subsidiaries both solely owned or joint ventures pay indirect taxes to the government and thus influence government spending.

Download Full-text