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

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  • Horst Raff

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  • 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. --

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s10290-008-0135-2
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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. 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.
  2. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, January.
  3. Assar Lindbeck & Dennis Snower, 2003. "The Firm as a Pool of Factor Complementarities," CESifo Working Paper Series 1046, CESifo Group Munich.
  4. Richard E. Baldwin & Gianmarco I. P. Ottaviano, 1998. "Multiproduct Multinationals and Reciprocal FDI Dumping," NBER Working Papers 6483, National Bureau of Economic Research, Inc.
  5. Rafael Rob & Nikolaos Vettas, 2003. "Foreign Direct Investment and Exports with Growing Demand," Review of Economic Studies, Wiley Blackwell, vol. 70(3), pages 629-648, 07.
  6. 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.
  7. 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.
  8. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2003. "Export versus FDI," NBER Working Papers 9439, National Bureau of Economic Research, Inc.
  9. Blonigen, Bruce A. & Ellis, Christopher J. & Fausten, Dietrich, 2005. "Industrial groupings and foreign direct investment," Journal of International Economics, Elsevier, vol. 65(1), pages 75-91, January.
  10. 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.
  11. Horstmann, Ignatius J & Markusen, James R, 1987. "Strategic Investments and the Development of Multinationals," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 109-21, February.
  12. 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.
  13. 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.
  14. 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.
  15. David Greenaway & Richard Kneller, 2007. "Firm heterogeneity, exporting and foreign direct investment," Economic Journal, Royal Economic Society, vol. 117(517), pages F134-F161, 02.
  16. Heckman, James J. & Singer, Burton, 1984. "Econometric duration analysis," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 63-132.
  17. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June.
  18. Head, C. Keith & Ries, John C. & Swenson, Deborah L., 1999. "Attracting foreign manufacturing: Investment promotion and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 197-218, March.
  19. 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.
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Citations

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Cited by:
  1. Erdal Yalcin, 2009. "Uncertain Productivity Growth and the Choice between FDI and Export," CESifo Working Paper Series 2773, CESifo Group Munich.
  2. Elisa Galeotti & Eva Ryšavá, 2008. "The endogeneity problem and fdi in transition: evidence from the privatized glass sector," Prague Economic Papers, University of Economics, Prague, vol. 2008(4), pages 319-339.
  3. 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.
  4. Raff, Horst & Ryan, Michael & Stähler, Frank, 2009. "Whole vs. shared ownership of foreign affiliates," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 572-581, September.

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