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Does Foreign Direct Investment Replace Home Country Investment? The Effect of European Integration on the Location of Swedish Investment

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  • Pontus Braunerhjelm
  • Lars Oxelheim

Abstract

The purpose of this paper is to examine the effects of European integration on the location of investments by Swedish multinational corporations (MNCs). Evidence is presented about the extent to which European integration has attracted investment by Swedish MNCs, and whether foreign direct investment is being undertaken at the expense of home country investment. In the empirical analysis, involving both OLS and iterative SUR techniques, a significant difference across industries has been confirmed. A substitutionary relationship between foreign and home country investment is found for more R&D-intensive production, whereas the opposite pattern seems to prevail for production based on traditional comparative advantage. The results of this study emphasize the importance of using disaggregated industry-level data when analysing the effects of foreign direct investment on home country investment.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Common Market Studies.

Volume (Year): 38 (2000)
Issue (Month): 2 (06)
Pages: 199-221

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Handle: RePEc:bla:jcmkts:v:38:y:2000:i:2:p:199-221

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0021-9886

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Citations

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Cited by:
  1. Dachs, Bernhard & Ebersberger, Bernd & Kinkel, Steffen & Som, Oliver, 2014. "The effects of production offshoring on R&D and innovation in the home country," Discussion Papers "Innovation Systems and Policy Analysis" 39, Fraunhofer Institute for Systems and Innovation Research (ISI).
  2. Oksanen, Olli-Pekka, 2006. "Are Foreign Investments Replacing Domestic Investments? - Evidence from Finnish Manufacturing," Discussion Papers 1001, The Research Institute of the Finnish Economy.
  3. Kokko, Ari, 2006. "The Home Country Effects Of Fdi In Developed Economies," EIJS Working Paper Series 225, The European Institute of Japanese Studies.
  4. Braunerhjelm, Pontus & Oxelheim, Lars & Thulin, Per, 2005. "The relationship between domestic and outward foreign direct investment: The role of industry-specific effects," International Business Review, Elsevier, vol. 14(6), pages 677-694, December.

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