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Effective Demand, Outward Investment and the (Theory of the) Transnational Corporation: An Empirical Investigation

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  • Pitelis, Christos

Abstract

That demand-side deficiencies can provide an inducement for outward investments by transnational corporations has never acquired much currency, despite its long history and the fact that existing theories often have implications supportive of it. Arguably a reason for this is that the idea has never been tested empirically. In this paper we provide the first such empirical test. First we critically survey and attempt to synthesize the mainstream microeconomic or supply-side theories of the TNC. Then we examine the case for a demand-side perspective, link this to the supply-side and discuss some existing indirect evidence in support of this perspective. Finally we provide a direct econometric test of the demand-side perspective, which provides clear support for it. Copyright 1996 by Scottish Economic Society.

Suggested Citation

  • Pitelis, Christos, 1996. "Effective Demand, Outward Investment and the (Theory of the) Transnational Corporation: An Empirical Investigation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(2), pages 192-206, May.
    • Handle: RePEc:bla:scotjp:v:43:y:1996:i:2:p:192-206
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    Cited by:

    1. Jones, Geoffrey & Pitelis, Christos, 2015. "Entrepreneurial Imagination and a Demand and Supply-side Perspective on the MNE and Cross-border Organization," Journal of International Management, Elsevier, vol. 21(4), pages 309-321.
    2. Cowling, Keith & Tomlinson, Philip r., 2001. "The Problem of Regional "Hollowing Out" in Japan: Lessons for Regional Industrial Policy," Economic Research Papers 269399, University of Warwick - Department of Economics.
    3. Shamsavari, Ali & Piranfar, Hosein, 2001. "FDI: an evolutionary/complexity perspective," Economics Discussion Papers 2001-5, School of Economics, Kingston University London.
    4. Pitelis, Christos & Argitis, George, 2009. "Factors influencing the Internationalisation of Firms: Micro Foundations of Macro Determinants," Papers DYNREG36, Economic and Social Research Institute (ESRI).
    5. Xiaming Liu & Haiyan Song & Yingqi Wei & Peter Romilly, 1997. "Country characteristics and foreign direct investment in China: A panel data analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(2), pages 313-329, June.
    6. Cuyvers, Ludo & Soeng, Reth & Plasmans, Joseph & Van Den Bulcke, Daniel, 2011. "Determinants of foreign direct investment in Cambodia," Journal of Asian Economics, Elsevier, vol. 22(3), pages 222-234, June.
    7. Cowling, Keith & Tomlinson, Philip R., 2002. "The Problem Of Regional "Hollowing Out" In Japan : Lessons For Regional Industrial Policy," The Warwick Economics Research Paper Series (TWERPS) 625, University of Warwick, Department of Economics.
    8. CUYVERS, Ludo & PLASMANS, Joseph & SOENG, Reth & VAN DEN BULCKE, Daniël, 2008. "Determinants of foreign direct investment in Cambodia: Country-specific factor differentials," Working Papers 2008003, University of Antwerp, Faculty of Business and Economics.

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