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Effects of outward FDI on home-country export competitiveness: The role of location and industry heterogeneity

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Author Info

  • Yan Chen
  • Wen-Chung Hsu
  • Chengqi Wang
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    Abstract

    Purpose – The purpose of this paper is to examine the effects of outward foreign direct investment (O-FDI) on the competitiveness of home-country export. Design/methodology/approach – This paper employs a six-year data set from Taiwanese manufacturing data for 15 industries over the period between 1991 and 2007. Findings – The authors find that exports in Taiwan are positively associated with O-FDI by Taiwanese firms. This finding supports the view that outward FDI complements home country exports and concurs with the majority of earlier empirical findings which focus on developed home countries. The authors also find that such effect is stronger for Taiwanese FDI in China than in other countries and in traditional sectors than in modern sectors. Originality/value – These findings suggest that location-and industry-specific characteristics moderate the strength of the relationship between O-FDI and home country exports.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Journal of Chinese Economic and Foreign Trade Studies.

    Volume (Year): 5 (2012)
    Issue (Month): 1 (February)
    Pages: 56-73

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    Handle: RePEc:eme:ceftpp:v:5:y:2012:i:1:p:56-73

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    Related research

    Keywords: Exports; Home-country export competitiveness; Industry heterogeneity; Location; Manufacturing industries; Outward foreign direct investment; Taiwan;

    References

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    1. Oscar Bajo-Rubio & María Montero-Muñoz, 2001. "Foreign Direct Investment and Trade: A Causality Analysis," Open Economies Review, Springer, vol. 12(3), pages 305-323, July.
    2. Sosin, Kim & Fairchild, Loretta, 1987. "Capital Intensity and Export Propensity in Some Latin American," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(2), pages 191-208, May.
    3. Head, Keith & Ries, John, 1999. "Rationalization effects of tariff reductions," Journal of International Economics, Elsevier, vol. 47(2), pages 295-320, April.
    4. Blomström, Magnus & Kokko, Ari, 1996. "Multinational Corporations and Spillovers," CEPR Discussion Papers 1365, C.E.P.R. Discussion Papers.
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    7. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May.
    8. Buckley, Peter J & Casson, Mark, 1981. "The Optimal Timing of a Foreign Direct Investment," Economic Journal, Royal Economic Society, vol. 91(361), pages 75-87, March.
    9. Clausing, Kimberly A, 2000. "Does Multinational Activity Displace Trade?," Economic Inquiry, Western Economic Association International, vol. 38(2), pages 190-205, April.
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    11. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June.
    12. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
    13. Lipsey, Robert E & Weiss, Merle Yahr, 1984. "Foreign Production and Exports of Individual Firms," The Review of Economics and Statistics, MIT Press, vol. 66(2), pages 304-08, May.
    14. Robert E. Lipsey & Eric D. Ramstetter & Magnus Blomstrom, 2000. "Outward FDI and Parent Exports and Employment: Japan, the United States, and Sweden," NBER Working Papers 7623, National Bureau of Economic Research, Inc.
    15. Keith Head & John Ries, 2004. "Exporting and FDI as Alternative Strategies," Oxford Review of Economic Policy, Oxford University Press, vol. 20(3), pages 409-423, Autumn.
    16. Zhang, Kevin Honglin & Song, Shunfeng, 2001. "Promoting exports: the role of inward FDI in China," China Economic Review, Elsevier, vol. 11(4), pages 385-396.
    17. Braga, Helson & Willmore, Larry, 1991. "Technological Imports and Technological Effort: An Analysis of Their Determinants in Brazilian Firms," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 421-32, June.
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