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Does Foreign Direct Investment Replace Home Country Investment? The Effect of European Integration on the Location of Swedish Investment

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Abstract

The purpose of this paper is to examine the effects of European integration on the location of investments by Swedish multinational corporations (MNCs). Evidence is presented about the extent to which European integration has attracted investment by Swedish MNCs, and whether foreign direct investment is being undertaken at the expense of home country investment. In the empirical analysis, involving both OLS and iterative SUR techniques, a significant difference across industries has been confirmed. A substitutionary relationship between foreign and home country investment is found for more R&D-intensive production, whereas the opposite pattern seems to prevail for production based on traditional comparative advantage. The results of this study emphasize the importance of using disaggregated industry-level data when analysing the effects of foreign direct investment on home country investment.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 522.

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Length: 29 pages
Date of creation: 15 Oct 1999
Date of revision:
Publication status: Published in Journal of Common Market Studies, 2000, pages 199-221.
Handle: RePEc:hhs:iuiwop:0522

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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Fax: +46 8 665 4599
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Keywords: Foreign direct investment; Home country investment; regional integration; Substitutionary; Schumpeterian;

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Cited by:
  1. Braunerhjelm, Pontus & Oxelheim, Lars & Thulin, Per, 2004. "The Relationship between Domestic and Outward Foreign Direct Investment: The Role of Industry-Specific Effects," Working Paper Series 625, Research Institute of Industrial Economics.
  2. Jaan Masso & Urmas Varblane & Priit Vahter, 2007. "The Impact of Outward FDI on Home-Country Employment in a Low-Cost Transition Economy," William Davidson Institute Working Papers Series wp873, William Davidson Institute at the University of Michigan.
  3. Bernhard Dachs & Bernd Ebersberger, 2013. "The Effects of Production Offshoring on R&D and Innovation in the Home Country," FIW Research Reports series V-001, FIW.
  4. Oksanen, Olli-Pekka, 2006. "Are Foreign Investments Replacing Domestic Investments? - Evidence from Finnish Manufacturing," Discussion Papers 1001, The Research Institute of the Finnish Economy.
  5. Oxelheim, Lars & Ghauri, Pervez, 2008. "EU – China and the Non-transparent Race for Inward FDI," Working Paper Series 745, Research Institute of Industrial Economics.
  6. Kokko, Ari, 2006. "The Home Country Effects Of Fdi In Developed Economies," EIJS Working Paper Series 225, The European Institute of Japanese Studies.

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