Labour market flexibility and FDI attraction: A macroeconomic analysis

Foreign direct investment is one mode of entry into international markets that can provide important benefits to host economies. For this reason, policymakers have sought to apply policies that attract foreign direct investment. Although there is extensive and relevant literature that explores the determinants of foreign direct investment, few studies exist that focus on the relationship between labour market flexibility and foreign direct investment; furthermore, most of these are firm-level studies and use old data. Thus, this study aims to analyze the influence of labour market flexibility on foreign direct investment based on macroeconomic data for a set of 180 countries and a relatively recent period of analysis (2004-2009). Using econometric techniques with panel data, the results show that labour market flexibility enhances the attraction of foreign direct investment. In particular, the rigidity of working hours is the dimension of labour market regulations that most negatively affects the attraction of foreign direct investment. Based on the control variables used, we found that the economic and financial incentives, trade barriers, the growth and the size of the market and the level of human capital are important determinants in the explanation of foreign direct investment patterns.

Download Full-text

Does FDI Mode of Entry Matter for Economic Developments of a Host Country? The Case of Korea

Asian Economic Papers ◽

10.1162/asep.2006.5.3.171 ◽

2006 ◽

Vol 5 (3) ◽

pp. 171-185

Author(s):

Seong-Bong Lee ◽

Mikyung Yun

Keyword(s):

Foreign Direct Investment ◽

Direct Investment ◽

Classification Scheme ◽

Ongoing Debate ◽

Firm Level ◽

Mode Of Entry ◽

Level Data ◽

Firm Level Data ◽

Economic Developments ◽

Level Performance

There is an ongoing debate on whether benefits of foreign direct investment (FDI) differ depending on the modes of FDI entry. This paper examines this debate using firm-level data on FDI in Korea. The paper adopts a new, more accurate classification scheme than the current official classification system and finds that there is little difference in firm-level performance according to FDI mode of entry. The paper thus argues against any provision of preferential incentives based on modes of entry.

Download Full-text

Do Stringent Environmental Policies Deter FDI? M&A versus Greenfield

Environmental and Resource Economics ◽

10.1007/s10640-021-00600-x ◽

2021 ◽

Author(s):

Sylwia Bialek ◽

Alfons J. Weichenrieder

Keyword(s):

Foreign Direct Investment ◽

Mergers And Acquisitions ◽

Environmental Regulation ◽

Direct Investment ◽

Environmental Policies ◽

Purchase Price ◽

Firm Level ◽

Mode Of Entry ◽

Heterogeneous Effects ◽

Significant Difference

AbstractStrict environmental regulation may deter foreign direct investment (FDI). The paper develops the hypothesis that regulation predominantly discourages FDI that is conducted as Greenfield investment rather than mergers and acquisitions (M&A). The hypothesis is tested with German firm-level FDI data. Empirically, stricter regulation reduces new Greenfield projects in polluting industries, but indeed has a much smaller impact on the number of M&As. This significant difference is compatible with the fact that existing operations often benefit from grandfathering rules, which provide softer regulation for pre-exisiting plants, and with the expectation that for M&As part of the regulation is capitalized in the purchase price. The heterogeneous effects help explaining mixed results in previous studies that have neglected the mode of entry.

Download Full-text

Foreign Direct Investment and the Flying Geese Model: Japanese Electronics Firms in Asia-Pacific

Environment and Planning A Economy and Space ◽

10.1068/a31171 ◽

2000 ◽

Vol 32 (2) ◽

pp. 281-304 ◽

Cited By ~ 36

Author(s):

David W Edgington ◽

Roger Hayter

Keyword(s):

Foreign Direct Investment ◽

Direct Investment ◽

Asia Pacific ◽

Critical Examination ◽

Host Countries ◽

Billiard Ball ◽

Firm Level ◽

Geographical Patterns ◽

Japanese Fdi

This paper is a critical examination of the ‘flying geese’ and ‘billiard ball’ models of foreign direct investment (FDI) and their ability to explain the spatial expansion of Japanese electronics multinationals (MNCs) in Asia-Pacific countries from 1985 to 1996. Data on Japanese FDI are analyzed in this region at the aggregate, sectoral, and firm level. The paper commences with a review of the flying geese model, especially that version which interprets Japanese FDI as a catalyst for Asian development, and the billiard ball metaphor which suggests a mechanism for host countries to ‘catch up’ with Japan. The authors then turn to an analysis of Japanese FDI in Asia-Pacific together with employment data for fourteen major firms. This allows an evaluation of the two models in terms of recent geographical patterns of investment and employment growth by electronics MNCs. A special case study of Matsushita Electric Industrial Co. Ltd (MEI) helps flesh out the evolving geography of Japanese electronics firms in Asia-Pacific. Although the results support the overall patterns suggested by the two models, the authors argue that metaphors and analogies such as flying geese and billiard balls should not be used casually and as a substitute for analysis.

Download Full-text

Foreign Direct Investment and Pollution Havens Hypothesis: Firm-Level Panel Data Evidence from China

Frontiers of Economics and Globalization - Globalization and the Environment of China ◽

10.1108/s1574-871520140000014004 ◽

2014 ◽

pp. 73-96

Author(s):

Maoliang Bu ◽

Shuwen Zhai ◽

Jie Zhang ◽

Wenping Zheng

Keyword(s):

Foreign Direct Investment ◽

Panel Data ◽

Direct Investment ◽

Firm Level ◽

Pollution Havens

Download Full-text

Foreign Direct Investment and Productivity Spillovers: A Firm-Level Analysis of Bangladesh in Comparison with Vietnam

10.21203/rs.3.rs-154359/v1 ◽

2021 ◽

Author(s):

Arif-Ur-Rahman ◽

Kazuo Inaba

Keyword(s):

Foreign Direct Investment ◽

Direct Investment ◽

Spillover Effects ◽

External Effects ◽

Productivity Improvement ◽

Firm Level ◽

Fdi Spillovers ◽

Foreign Presence ◽

Backward Linkages ◽

Level Analysis

Abstract Foreign direct investment (FDI) is expected to generate external effects—usually termed FDI spillovers—for a host country, and these spillovers are thought to have consequences on the productivity of domestic firms. Despite this strong expectation, the empirical findings on FDI spillover are still indecisive. This study examines firm-level panel data to determine the effects of FDI spillover on firms’ productivity in Bangladesh in comparison to Vietnam. We consider both the horizontal and vertical (backward and forward) spillover effects of FDI. We find evidence that Bangladeshi firms gain productivity improvement through intra-industry or horizontal linkages, whereas Vietnamese firms gain through backward linkages. Our findings suggest that increases in foreign presence in the same industry for Bangladesh and in downstream industries for Vietnam are related with increase in output of domestic firms.JEL Code: F2, O1, O3

Download Full-text

IFRS Harmonization and Foreign Direct Investment

Advances in Business Strategy and Competitive Advantage - Analyzing the Relationship between Corporate Social Responsibility and Foreign Direct Investment ◽

10.4018/978-1-5225-0305-7.ch004 ◽

2016 ◽

pp. 31-48 ◽

Cited By ~ 1

Author(s):

Javier Vidal-García ◽

Marta Vidal

Keyword(s):

Foreign Direct Investment ◽

Financial Reporting ◽

Direct Investment ◽

Relevant Literature ◽

Accounting Standards ◽

Foreign Direct Investments ◽

International Accounting Standards ◽

Reporting Standards ◽

Financial Reporting Standards ◽

Cross Border

IFRS refers to International Financial Reporting Standards, which are the guidelines that provide the framework for accounting works. The principles are also known as the International Accounting Standards (IAS). This global financial concept was first introduced in 2001 to equip investors with analyzed accounting statements. In this Chapter we review the relation between IFRS and Foreign Direct Investments (FDIs). We review the relevant literature that analyses the effects on IFRS on FDIs and cross-border acquisitions. The economic literature states that the introduction of IFRS has presented an important increase in FDIs. The evidence shows that IFRS adopting countries attract investments from countries that implemented IFRS and non-IFRS implementing countries.

Download Full-text