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Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects

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  • Horst Raff

    ()

  • Michael J. Ryan

Abstract

This paper uses a proportional hazard model to study foreign direct investment by Japanese manufacturers in Europe between 1970 and 1994. We divide each firm?s investment total into a sequence of individual investment decisions and analyze how firm-specific characteristics affect each decision. We find that total factor productivity is a significant determinant of a firm?s initial and subsequent investments. Parent-firm size does not have a significant influence on the initial decision to invest. Large firms simply have more investments than smaller firms. Other firm-specific characteristics, such as the R&D intensity, export share and keiretsu membership, also play a role in the investment process. --

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Bibliographic Info

Article provided by Springer in its journal Review of World Economics.

Volume (Year): 144 (2008)
Issue (Month): 1 (April)
Pages: 1-31
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Handle: RePEc:spr:weltar:v:144:y:2008:i:1:p:1-31

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Related research

Keywords: Foreign direct investment; productivity; hazard model; Japan; keiretsu;

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References

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  1. Lindbeck, Assar & Snower, Dennis J., 2003. "The Firm as a Pool of Factor Complementarities," Working Paper Series 598, Research Institute of Industrial Economics.
  2. Drake, Tracey A. & Caves, Richard E., 1992. "Changing determinants of Japanese foreign investment in the United States," Journal of the Japanese and International Economies, Elsevier, vol. 6(3), pages 228-246, September.
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  4. Len Trevino & John Daniels, 1994. "An empirical assessment of the preconditions of Japanese manufacturing foreign direct investment in the United States," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(3), pages 576-599, September.
  5. Hennart, J.-F.M.A., 1991. "The transaction costs theory of joint ventures : an empirical study of Japanese subsidiaries in the United States," Open Access publications from Tilburg University urn:nbn:nl:ui:12-175820, Tilburg University.
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  13. Blomstrom, Magnus & Lipsey, Robert E, 1991. " Firm Size and Foreign Operations of Multinationals," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(1), pages 101-07.
  14. Belderbos, Rene & Sleuwaegen, Leo, 1996. "Japanese Firms and the Decision to Invest Abroad: Business Groups and Regional Core Networks," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 214-20, May.
  15. Head, Keith & Ries, John, 2003. "Heterogeneity and the FDI versus export decision of Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 448-467, December.
  16. Bruce A. Blonigen & Christopher J. Ellis & Dietrich Fausten, 2003. "Industrial groupings and foreign direct investment," University of Oregon Economics Department Working Papers 2003-19, University of Oregon Economics Department, revised 01 Mar 2003.
  17. Horst, Thomas, 1972. "Firm and Industry Determinants of the Decision to Invest Abroad: An Empirical Study," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 258-66, August.
  18. David Greenaway & Richard Kneller, 2007. "Firm heterogeneity, exporting and foreign direct investment," Economic Journal, Royal Economic Society, vol. 117(517), pages F134-F161, 02.
  19. Raff, Horst & Ryan, Michael & Stähler, Frank, 2008. "Firm Productivity and the Foreign-Market Entry Decision," Economics Working Papers 2008,02, Christian-Albrechts-University of Kiel, Department of Economics.
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Cited by:
  1. Stähler, Frank & Ryan, Michael & Raff, Horst, 2007. "Whole versus Shared Ownership of Foreign Affiliates," Economics Working Papers 2007,18, Christian-Albrechts-University of Kiel, Department of Economics.

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