The role of context-specific factors in IFDI’s influence on OFDI of developing country

2017 ◽  
Vol 10 (2) ◽  
pp. 172-187
Author(s):  
Mengting Zhang ◽  
Changbiao Zhong ◽  
Feng Yu
Keyword(s):  
Foreign Direct Investment ◽  
Developing Country ◽  
Direct Investment ◽  
Spillover Effect ◽  
Developed Countries ◽  
International Investment ◽  
Competition Effect ◽  
Content Type ◽  
Specific Factors ◽  
Context Specific

Purpose Although prior research has highlighted the importance of foreign direct investment (FDI) on a country’s internationalization, it has largely focused on developed countries. As a result, the FDI performance of a developing country, which differs fundamentally from that of developed countries in their environment, remains unclear. Under the newly development environment, the traditional FDI theories have been challenged by the increasing investments from emerging and transition economies. The theory system needs a fresh situation’s supplement urgently. Design/methodology/approach On the basis of a literature review, this paper constructed an empirical model to further study the moderating effects of context-specific factors on the influence of inbound foreign direct investment (IFDI) on outbound foreign direct investment (OFDI). China was chosen as the representation of a developing country, and its data of mutual investments with 125 countries from 2003 to 2014 were used to carry out hypothesis testing. Findings The analysis and results of this paper suggested: first, for China, the overall influence of IFDI on OFDI is positive. That is to say, IFDI’s positive spillover effect is greater than the negative competition effect. Second, innovational distance’s effect on FDI is complicated. It can either be positive or negative, which calls for further investigation. Third, economic distance negatively affects OFDI and negatively moderates IFDI’s effect on OFDI, especially the export. To some extent, the moderating effect that resulted from the competition effect will reduce overseas investment by extruding some of the local enterprises. Fourth, cultural distance’s effect is closely related to the spillover effect that will positively moderate IFDI’s influence on OFDI. Originality/value This paper enriched the international investment theoretical system by adding a mechanism of multiway international investment of a developing country. The research also has a guiding significance for developing countries’ governments in coordinating mutual international investments. Also, these results have important implications for how policymakers promote OFDI and put forward new theoretical avenues for conceptualizing the internationalization process.

Does foreign direct investment spillover total factor productivity growth? A study of Indian drugs and pharmaceutical industry

2017 ◽  
Vol 24 (7) ◽  
pp. 1937-1955 ◽  
Author(s):  
Nitin Arora ◽  
Preeti Lohani
Keyword(s):  
Foreign Direct Investment ◽  
Pharmaceutical Industry ◽  
Total Factor Productivity ◽  
Direct Investment ◽  
Spillover Effect ◽  
Foreign Firms ◽  
Factor Productivity ◽  
Content Type ◽  
Domestic Firms ◽  
Tfp Growth

Purpose Foreign firms have certain advantages which may spillover to domestic firms in the form of improvements in total factor productivity (TFP) growth. The purpose of this paper is to empirically observe the presence of TFP spillovers of foreign direct investment (FDI) to domestic firms through analyzing source of TFP growth in Indian drugs and pharmaceutical industry. Design/methodology/approach This paper examines the sources of TFP spillovers of FDI in Indian drugs and pharmaceutical industry over the period 1999 to 2014. The data of 304 firms has been used for estimation of the growth rates of TFP and its sources under stochastic frontier analyses based Malmquist productivity index framework. For frontier estimation, the Wang and Ho (2010) model has been executed using translog form of production function. Findings The results show that there exists significant TFP spillover effect from the presence of foreign equity in drugs and pharmaceutical industry of India. The results also show that the major source of TFP fluctuations in the said industry is managerial efficiency that has been significantly affected by FDI spillover variables. In sum, the phenomenon of significant Intra-industry (horizontal) efficiency led productivity spillovers of FDI found valid in case of Indian drugs and pharmaceutical industry. Research limitations/implications The number of foreign firms is very less to imitate the significant impact of foreign investment on TFP growth of Indian pharmaceutical industry at aggregated level; and the Wang and Ho (2010) model is failing to capture direct impact of FDI on technological change under Malmquist framework. Practical implications Since, there exists dominance of domestic firms in Indian drugs and pharmaceutical industry, the planners should follow the policy which not only attract FDI but also benefit domestic firms; for example, developing modern infrastructure and institution which will further help domestic firms to absorb spillovers provided by the Multinational Corporations and also accelerate the growth and development of the economy. Social implications In no case, the foreign firms should dominate the market share otherwise the efficiency spillover effect will be negative and the domestic firms will be destroyed under the self-centric approach of foreign firms protected by the recent patent laws. Originality/value The study is a unique attempt to discuss the production structure and sources of TFP spillovers of FDI in Indian drugs and pharmaceutical industry with such a wide coverage of 304 firms over a period of 16 years under Wang and Ho (2010) model’s framework. The existing studies on TFP spillovers are using either a small sample size of firms or based upon traditional techniques of measuring spillover effects.

Does the origin matter? The effects of cross-border mergers and acquisitions in France

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Federico Carril-Caccia
Keyword(s):  
Foreign Direct Investment ◽  
Mergers And Acquisitions ◽  
Direct Investment ◽  
Developed Countries ◽  
Emerging Countries ◽  
Intangible Asset ◽  
Data Set ◽  
Content Type ◽  
Cross Border ◽  
The Impact

PurposeThe present article analyses the effects of cross-border mergers and acquisitions (CBM&As) on targets' total factor productivity (TFP), employment, wages and intangible-asset investment. The author investigates whether the impact of CBM&As differs depending on the origin of the investing multinational (MNE). The author distinguishes between CBM&As from European countries, other developed countries and emerging countries.Design/methodology/approachThe author makes use of a unique firm-level data set of foreign direct investment in the French manufacturing sector. The authors applies propensity score matching and difference in differences to estimate the effect of CBM&As.FindingsThe results show that the consequences of CBM&As differ strongly depending on the origin. CBM&As from European MNEs have a positive impact on TFP, wages and intangible-asset investment, and those from emerging countries seem to increase wages and intangible-asset investments. In contrast, CBM&As that originate from MNEs from other developed countries do not have a significant effect.Originality/valueThis article contributes to the growing literature on the effects of foreign direct investment that highlights the relevance of accounting for the MNEs' origin. In particular, it is the first to address the impact of emerging-country MNEs' CBM&As in Europe.

Foreign Direct Investment and its Effect on Self-Reliant Innovation in Jiangxi

2011 ◽  
Vol 281 ◽  
pp. 84-89
Author(s):  
Xiao Hong Li ◽  
Yang Gang Yu
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Influence Factors ◽  
Spillover Effect ◽  
Developed Countries ◽  
Jiangxi Province ◽  
The Status ◽  
Negative Effect ◽  
Function Calculation ◽  
Development Threshold

In this paper, we attempt to inspect the status of Foreign Direct Investment (FDI) and its spillover effect on self-reliant innovation capability in Jiangxi province. Based on production function calculation, correlation coefficient between logarithm FDI and logarithm self-reliant innovation (sales revenue of new products) is -0.080. It indicates that the growth of FDI plays no or even negative effect on the growth of self-reliant innovation empirically. The reasons are mainly: (1) too many influence factors which affect the growth of self-reliant innovation disturb the model explanatory ability; (2) the influence of FDI is much less than of R&D labors and expenditures inputs. According to empirical research, the reasons for inefficiency FDI are mainly from two aspects: (1) FDI inward Jiangxi is mainly sourcing from undeveloped and developing countries (or regions) but not developed countries. (2) Technical spillover effect of FDI is performing under capacity for economic complexity and/or development threshold.

scholarly journals The Territorial Inequalities In The Location Of The Foreign Direct Investment In The 90s: The Spanish Case

2011 ◽  
Vol 2 (2) ◽  
Author(s):  
Raquel Diaz Vazquez
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Foreign Capital ◽  
Developed Countries ◽  
International Investment ◽  
Behaviour Pattern ◽  
Spanish Economy ◽  
Geographical Concentration ◽  
New Strategy ◽  
National Environment

One of the main characteristics on the world economy during the second half of the eighties was the boom registered by the international investment, in particular, going to the Spanish economy. But the nineties were also characterised by the consolidation of these Foreign Direct Investment (FDI) inflows. In addition, the UNCTAD, in their World Investment Report (WIR) 2001, alert about a pattern of concentration of this FDI in the more developed countries in the last years that it is pushing to a concentration within a national environment in the more developed regions too. So, inside this context of concentration of the FDI in the international environment, and considering that the Spanish economy was one of the most important destinations for the FDI, the present paper wants to analyse if this same behaviour pattern of FDI is verified within the Spanish economy. The data will show that the geographical concentration of the FDI in the more developed regions exists and that is increasing along the time. A new strategy based on the relocation of foreign capital is generated from the international economic crisis. But the Spanish economy and, very in particular, the Madrids community, they have never stopped to be attractive for the foreign investor. Even, the concentration of the foreign capital in this region is intensified along the time, harming the less developed regions of the Spanish economy. So, this paper wants to get the attention on this high degree of concentration of this foreign capital in the Spanish economy in terms of other macroeconomic variables, as the GDP or the GFCF. As result, a very important presence of foreign capital in the more developed areas is verified. And wide differences with regard to the remaining regions are shown.

Chinese investment in United States will not recover

2019 ◽  
Keyword(s):  
United States ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developed Countries ◽  
The United States ◽  
High Tech ◽  
Content Type ◽  
Chinese Investment ◽  
Investment Opportunities ◽  
Business Opportunities

Subject Chinese investment in the United States. Significance Chinese investment in the United States has suffered a double blow from deteriorating US-China relations and restrictions put in place by China’s own government. Foreign direct investment (FDI) flows increased rapidly until 2016, making China an important source of FDI for the United States. Since then they have sharply declined. Impacts Chinese companies will look more actively for investment opportunities in other developed countries, especially in Europe. Washington is likely to press its allies to restrict FDI from China and to coordinate policies, citing security concerns. US businesses will be negatively affected by a weaker inflow of ‘China money’. US firms will find it harder to establish links with China, which may cause them to miss business opportunities there. China’s government will provide support for Chinese firms to acquire US high-tech firms.

Foreign Direct Investment, Intellectual Property Rights, and Productivity Growth

2014 ◽  
Vol 05 (03) ◽  
pp. 1440009
Author(s):  
Sasatra Sudsawasd ◽  
Santi Chaisrisawatsuk
Keyword(s):  
Foreign Direct Investment ◽  
Intellectual Property ◽  
Property Rights ◽  
Intellectual Property Rights ◽  
Productivity Growth ◽  
Direct Investment ◽  
Developed Countries ◽  
Outward Fdi ◽  
The Impact ◽  
Ipr Protection

Using panel data for 57 countries over the period of 1995–2012, this paper investigates the impact of intellectual property rights (IPR) processes on productivity growth. The IPR processes are decomposed into three stages — innovation process, commercialization process, and protection process. The paper finds that better IPR protection is directly associated with productivity improvements only in developed economies. In addition, the contribution of IPR processes on growth through foreign direct investment (FDI) appears to be quite limited. Only inward FDI in developed countries which creates better innovative capability leads to higher growth. In connection with outward FDI, only the increase in IPR protection and commercialization are proven to improve productivity in the case of developing countries, particularly when the country acts as the investing country.

scholarly journals Is Russia successful in attracting foreign direct investment? Evidence based on gravity model estimation

2016 ◽  
Vol 16 (3) ◽  
pp. 245-267 ◽  
Author(s):  
Oleg Mariev ◽  
Igor Drapkin ◽  
Kristina Chukavina
Keyword(s):  
Foreign Direct Investment ◽  
Gravity Model ◽  
Host Country ◽  
Direct Investment ◽  
Recipient Country ◽  
Developed Countries ◽  
Likelihood Method ◽  
Empirical Estimation ◽  
Fdi Inflows ◽  
Russian Economy

Abstract The aim of this paper is twofold. First, it is to answer the question of whether Russia is successful in attracting foreign direct investment (FDI). Second, it is to identify partner countries that “overinvest” and “underinvest” in the Russian economy. We do this by calculating potential FDI inflows to Russia and comparing them with actual values. This research is associated with the empirical estimation of factors explaining FDI flows between countries. The methodological foundation used for the research is the gravity model of foreign direct investment. In discussing the pros and cons of different econometric methods of the estimation gravity equation, we conclude that the Poisson pseudo maximum likelihood method with instrumental variables (IV PPML) is one of the best options in our case. Using a database covering about 70% of FDI flows for the period of 2001-2011, we discover the following factors that explain the variance of bilateral FDI flows in the world economy: GDP value of investing country, GDP value of recipient country, distance between countries, remoteness of investor country, remoteness of recipient country, level of institutions development in host country, wage level in host country, membership of two countries in a regional economic union, common official language, common border and colonial relationships between countries in the past. The potential values of FDI inflows are calculated using coefficients of regressors from the econometric model. We discover that the Russian economy performs very well in attracting FDI: the actual FDI inflows exceed potential values by 1.72 times. Large developed countries (France, Germany, UK, Italy) overinvest in the Russian economy, while smaller and less developed countries (Czech Republic, Belarus, Denmark, Ukraine) underinvest in Russia. Countries of Southeast Asia (China, South Korea, Japan) also underinvest in the Russian economy.

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