FDI Contribution to Capital Flows and Investment in Capacity
AbstractThe paper discusses a theory of FDI, which captures a unique feature: hands-on management standards to react in real time to a changing economic environment in the firms that FDI investors gain control. Equipped with superior managerial skills, foreign direct investors outbid portfolio investors for the top productivity firms in a particular industry in which they have specialized in the source country. Consequently, FDI investors would make investment, both larger, and higher quality, than the domestic investors. The theory can explain both two-way FDI flows among developed countries, and one-way FDI flows from developed to developing countries. Gains to the host country from FDI stem from the informational value of FDI. The predictions of the theory are consistent with the evidence: larger FDI coefficient in the domestic investment and output growth regressions relative to the equity flow coefficient, reflects a more significant role for FDI in the domestic investment process.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 052003.
Length: 22 pages
Date of creation: Mar 2003
Date of revision:
Contact details of provider:
Postal: 55th Floor , Two International Finance Centre , 8 Finance Street , Central, Hong Kong
Phone: (852)2878 1978
Fax: (852)2878 7006
Web page: http://www.hkimr.org
More information through EDIRC
Other versions of this item:
- Assaf Razin, 2002. "FDI Contribution to Capital Flows and Investment in Capacity," NBER Working Papers 9204, National Bureau of Economic Research, Inc.
- F2 - International Economics - - International Factor Movements and International Business
- F3 - International Economics - - International Finance
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February.
- Oliver Hart, 2001.
Harvard Institute of Economic Research Working Papers
1924, Harvard - Institute of Economic Research.
- Blomstrom, Magnus & Globerman, Steven & Kokko, Ari, 1999.
"The determinants of host country spillovers from foreign direct investment: review and synthesis of the literature,"
Working Paper Series in Economics and Finance
502, Stockholm School of Economics.
- Blomström, Magnus & Globerman, Steven & Kokko, Ari, 1999. "The Determinants of Host Country Spillovers from Foreign Direct Investment: Review and Synthesis of the Literature," Working Paper Series in Economics and Finance 339, Stockholm School of Economics.
- Rui Albuquerque, 2004.
"The Composition of International Capital Flows: Risk Sharing Through Foreign Direct Investment,"
- Albuquerque, Rui, 2003. "The composition of international capital flows: risk sharing through foreign direct investment," Journal of International Economics, Elsevier, vol. 61(2), pages 353-383, December.
- Helpman, Elhanan, 1984.
"A Simple Theory of International Trade with Multinational Corporations,"
Journal of Political Economy,
University of Chicago Press, vol. 92(3), pages 451-71, June.
- Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Scholarly Articles 3445092, Harvard University Department of Economics.
- Razin, Assaf & Sadka, Efraim, 2003.
"Gains from FDI inflows with incomplete information,"
Elsevier, vol. 78(1), pages 71-77, January.
- Assaf Razin & Efraim Sadka, 2002. "Gains from FDI Inflows with Incomplete Information," NBER Working Papers 9008, National Bureau of Economic Research, Inc.
- Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995.
"How Does Foreign Direct Investment Affect Economic Growth?,"
NBER Working Papers
5057, National Bureau of Economic Research, Inc.
- Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
- Mody, Ashoka & Razin, Assaf & Sadka, Efraim, 2002.
"The Role of Information in Driving FDI: Theory and Evidence,"
CEPR Discussion Papers
3619, C.E.P.R. Discussion Papers.
- Assaf Razin & Ashoka Mody & Efraim Sadka, 2002. "The Role of Information in Driving FDI: Theory and Evidence," NBER Working Papers 9255, National Bureau of Economic Research, Inc.
- Barry P. Bosworth & Susan M. Collins, 1999. "Capital Flows to Developing Economies: Implications for Saving and Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 143-180.
- Kenneth A. Froot, 1991. "Japanese Foreign Direct Investment," NBER Working Papers 3737, National Bureau of Economic Research, Inc.
- Blomström, Magnus & Globerman, Steve & Kokko, Ari, 2000. "The Determinants of Host Country Spillovers from Foreign Direct Investment," CEPR Discussion Papers 2350, C.E.P.R. Discussion Papers.
- Bélyácz, Iván & Kuti, Mónika, 2009.
"Külföldi működőtőke és külső eladósodás. Kísérlet a makrogazdasági tőkestruktúra új szempontú vizsgálatára
[Foreign operating capital and foreign indebtedness. An attempt to exa," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 133-154.
- Calderon, Cesar & Loayza, Norman & Serven, Luis, 2004. "Greenfield foreign direct investment and mergers and acquisitions - feedback and macroeconomic effects," Policy Research Working Paper Series 3192, The World Bank.
- Gordon de Brouwer, 2003. "Macroeconomics and Governance," Treasury Working Papers 2003-04, Treasury, Australian Government, revised Dec 2003.
- Reza Y Siregar & Keen Meng Choy, 2010.
"Determinants of International Bank Lending from the Developed World to East Asia,"
IMF Staff Papers,
Palgrave Macmillan, vol. 57(2), pages 484-516, June.
- Siregar, Reza Yamora & Choy, KM, 2009. "Determinants of International Bank Lending from the Developed World to East Asia," MPRA Paper 14989, University Library of Munich, Germany.
- Barbara Pfeffer, 2008. "FDI and FPI - Strategic Complements?," MAGKS Papers on Economics 200812, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
- SULIMAN, Osman, 2013. "Do Capital Inflows Cause Currency Black Markets In Mena Countries? Causality Tests For Heterogeneous Panels," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 13(1), pages 187-202.
- Assaf Razin & Efraim Sadka, 2004. "Transparency, Specialization and FDI (new title: Corporate Transparency, Cream-Skimming and FDI)," CESifo Working Paper Series 1161, CESifo Group Munich.
- Yamin Ahmad & Pietro Cova & Rodrigo Harrison, 2004. "Foreign Direct Investment versus Portfolio Investment : A Global Games Approach," Working Papers 05-03, UW-Whitewater, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (HKIMR).
If references are entirely missing, you can add them using this form.