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The Economics of Foreign Direct Investment and Trade with an Application to the U.S. Food Processing Industry

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  • Munisamy Gopinath
  • Daniel Pick
  • Utpal Vasavada

Abstract

This article investigates the determinants of foreign direct investment and its relationship to trade in the U.S. food industry. A multinational corporation maximizes profits by choosing between production at home, which is exported, and production in a host country. This introduces the possibility that foreign affiliate sales can substitute and/or complement exports. The empirical framework consists of a four-equations system with foreign affiliate sales, exports, affiliate employment, and FDI as endogenous variables. The results confirm small substitution between foreign sales and exports, and that the host country's protection policies affect the decision to invest abroad. Copyright 1999, Oxford University Press.

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File URL: http://hdl.handle.net/10.2307/1244593
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 81 (1999)
Issue (Month): 2 ()
Pages: 442-452

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Handle: RePEc:oup:ajagec:v:81:y:1999:i:2:p:442-452

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Cited by:
  1. Doan, Darcie & Goldstein, Andrew & Zahniser, Steven & Vollrath, Thomas L. & Bolling, H. Christine, 2004. "North American Integration In Agriculture: A Survey Paper," North American Agrifood Integration: Situation and Perspectives, May 2004, Cancun, Mexico 16730, Farm Foundation.
  2. Peter Walkenhorst;, 2001. "Determinants of foreign direct investment in the food industry: The case of Poland," Agribusiness, John Wiley & Sons, Ltd., vol. 17(3), pages 383-395.
  3. Cai, Xiaowei & Stiegert, Kyle W., 2012. "Modal FDI Strategies in Asia-Pacific Region," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 15(2).
  4. Plummer, Charles & Makki, Shiva S., 2004. "Globalization Of The Frozen Potato Industry," 2004 Annual meeting, August 1-4, Denver, CO 19950, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Marchant, Mary A. & Saghaian, Sayed H. & Vickner, Steven S., 1999. "Trade And Foreign Direct Investment Management Strategies For U.S. Processed Food Firms In China," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 2(02).
  6. Makki, Shiva S. & Somwaru, Agapi & Bolling, H. Christine, 2003. "Determinants Of U.S. Foreign Direct Investments In Food Processing Industry: Evidence From Developed And Developing Countries," 2003 Annual meeting, July 27-30, Montreal, Canada 22035, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Garcia-Fuentes, Pablo A. & Kennedy, P. Lynn & Ferreira, Gustavo F.C., 2013. "U.S. Foreign Direct Investment in Latin America and the Caribbean: A case of Remittances and Market Size," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142985, Southern Agricultural Economics Association.
  8. Reed, Michael R. & Babool, Md. Ashfaqul Islam, 2003. "Factors Affecting International Mergers and Acquisitions," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 6(04).
  9. Steven C. Blank, 2002. "A Portfolio Of Threats To American Agriculture," Contemporary Economic Policy, Western Economic Association International, vol. 20(4), pages 381-393, October.
  10. Makki, Shiva S. & Somwaru, Agapi & Bolling, H. Christine, 2004. "Determinants of Foreign Direct Investment in the Food-Processing Industry: A Comparative Analysis of Developed and Developing Economies," Journal of Food Distribution Research, Food Distribution Research Society, vol. 35(03), November.
  11. Mattson, Jeremy W. & Koo, Won W., 2002. "U.S. Processed Food Exports And Foreign Direct Investment In The Western Hemisphere," Agribusiness & Applied Economics Report 23547, North Dakota State University, Department of Agribusiness and Applied Economics.
  12. Wilson, Norbert L.W., 2006. "Linkages amongst Foreign Direct Investment, Trade and Trade Policy: An Economic Analysis with Applications to the Food Sector," 2006 Annual meeting, July 23-26, Long Beach, CA 21064, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  13. Liu, Xiaming & Wang, Chengang & Wei, Yingqi, 2001. "Causal links between foreign direct investment and trade in China," China Economic Review, Elsevier, vol. 12(2-3), pages 190-202.
  14. Somwaru, Agapi & Bolling, H. Christine, 1999. "U.S. Foreign Direct Investment And Trade: Substitutes Or Complements? The Case Of The Food Processing Industry," 1999 Annual meeting, August 8-11, Nashville, TN 21715, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  15. Hajderllari, Luljeta & Karantininis, Kostas & Lawson, Lartey Godwin, 2011. "Gravity model of outward FDI and trade in Agri-food in Denmark," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114771, European Association of Agricultural Economists.
  16. Carter, Colin A. & Yilmaz, Alper, 1999. "Foreign Direct Investment (Fdi) And Trade - Substitutes And Complements? An Application To The Processed Food Industry," 1999 Annual meeting, August 8-11, Nashville, TN 21665, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  17. Buccola, Steven T. & Durham, Catherine A. & Gopinath, Munisamy & Henderson, Erin, 2001. "Food Manufacturing Cooperatives' Overseas Business Portfolios," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), July.
  18. Luljeta Hajderllari & Kostas Karantininis & Lartey G. Lawson, 2012. "FDI as an Export-Platform: A Gravity Model for the Danish Agri-Food Industry," IFRO Working Paper 2012/7, University of Copenhagen, Department of Food and Resource Economics.

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