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Foreign firm entry in an open economy: the case of Portugal

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  • Natalia Barbosa
  • Paulo Guimaraes
  • Douglas Woodward

Abstract

The purpose of this paper is to analyse the entry process of foreign direct investment (FDI) in Portuguese industrial sectors. Portugal presents an interesting case where firms enter to take advantage of export opportunities. The results suggest that foreign firms possess the ability to overcome existing entry barriers that affect domestic firms. Apparently, foreign firms have different expectations about profitability than domestic firms, possibly due to foreign firms' export-orientation to the rest of the European Union (EU). They appear to desire industries where other foreign firms have clustered. Above all, it appears that these foreign firms enter industries to exploit Portugal's chief location advantage in Western Europe: low wages. Portugal's FDI experience is relevant to other countries that have opened their economies to greater trade and investment and attracted export-oriented firms.

Suggested Citation

  • Natalia Barbosa & Paulo Guimaraes & Douglas Woodward, 2004. "Foreign firm entry in an open economy: the case of Portugal," Applied Economics, Taylor & Francis Journals, vol. 36(5), pages 465-472.
    • Handle: RePEc:taf:applec:v:36:y:2004:i:5:p:465-472
    DOI: 10.1080/00036840410001682160
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    Cited by:

    1. Irina Melo & Alexandra Ferreira-Lopes, 2013. "Regional and Sectoral Foreign Direct Investment in Portugal since Joining the EU: A Dynamic Portrait," GEE Papers 0049, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Jul 2013.
    2. Laura Resmini, 2014. "Patterns of FDI in Southern European Periphery: a Tale of Missing FDI?," ERSA conference papers ersa14p543, European Regional Science Association.
    3. Carla Daniela Calá & Miguel Manjón-Antolín & Josep-Maria Arauzo-Carod, 2016. "Regional determinants of firm entry in a developing country," Papers in Regional Science, Wiley Blackwell, vol. 95(2), pages 259-279, June.
    4. Josep‐Maria Arauzo‐Carod & Daniel Liviano‐Solis & Miguel Manjón‐Antolín, 2010. "Empirical Studies In Industrial Location: An Assessment Of Their Methods And Results," Journal of Regional Science, Wiley Blackwell, vol. 50(3), pages 685-711, August.
    5. Schäffler, Johannes & Hecht, Veronika & Moritz, Michael, 2014. "Regional determinants of German FDI in the Czech Republic : evidence from a gravity model approach," IAB-Discussion Paper 201403, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Niklas Elert, 2014. "What determines entry? Evidence from Sweden," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 55-92, August.
    7. Arauzo Carod, Josep Maria & Liviano, Daniel, 2007. "Agglomeration and location: a nonparametric approach," Working Papers 2072/4288, Universitat Rovira i Virgili, Department of Economics.
    8. Kinne, Jan & Resch, Bernd, 2017. "Analysing and predicting micro-location patterns of software firms," ZEW Discussion Papers 17-063, ZEW - Leibniz Centre for European Economic Research.
    9. Calá, Carla Daniela, 2018. "Sectoral and regional determinants of firm dynamics in developing countries: evidence for low-, mediumand high-tech manufacturing in Argentina," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    10. Calá, Carla Daniela, 2014. "Regional issues on firm entry and exit in Argentina: core and peripheral regions," Nülan. Deposited Documents 2023, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    11. Calá, Carla Daniela, 2009. "Spatial issues on firm demography: an analysis for Argentina," Nülan. Deposited Documents 1379, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    12. Marie-Line Duboz & Nathalie Kroichvili & Julie Le Gallo, 2019. "What matters most for FDI attraction in services: country or region performance? An empirical analysis of EU for 1997–2012," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 63(3), pages 601-638, December.
    13. Barbara M. Roberts & Steve Thompson & Katarzyna Mikolajczyk, 2008. "Privatization, Foreign Acquisition and the Motives for FDI in Eastern Europe," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(3), pages 408-427, October.
    14. Shujie Yao, 2006. "On economic growth, FDI and exports in China," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 339-351.
    15. Aurora A. C. Teixeira & Ana Sofia Loureiro, 2019. "FDI, income inequality and poverty: a time series analysis of Portugal, 1973–2016," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 18(3), pages 203-249, October.
    16. Miguel Lebre de Freitas & Ricardo Paes Mamede, 2008. "Structural Transformation and the role of Foreign Direct Investment in Portugal: a descriptive analysis for the period 1990-2005," GEE Papers 0009, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Dec 2008.
    17. Barbosa, Natália & Eiriz, Vasco, 2009. "Linking corporate productivity to foreign direct investment: An empirical assessment," International Business Review, Elsevier, vol. 18(1), pages 1-13, February.
    18. Varum, Celeste Amorim & Rocha, Vera Catarina Barros, 2011. "Do foreign and domestic firms behave any different during economic slowdowns?," International Business Review, Elsevier, vol. 20(1), pages 48-59, February.
    19. Liviano Solís, Daniel & Arauzo Carod, Josep Maria, 2011. "Industrial Location and Space: New Insights," Working Papers 2072/152137, Universitat Rovira i Virgili, Department of Economics.

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