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Multinational Investors as Export Superstars: How Emerging-Market Governments Can Reshape Comparative Advantage

Author

Listed:
  • Caroline Freund

    (Peterson Institute for International Economics)

  • Theodore H. Moran

    (Peterson Institute for International Economics)

Abstract

This paper investigates three cases—Malaysia, Costa Rica, and Morocco—in which host authorities were successful in using foreign direct investment to change the export profile of the domestic economy. Each case highlights the importance of first-mover firms, and clusters of follower firms, in oligopolistic industries, whose emergence changes the revealed comparative advantage of the domestic economy. The results from these three cases are shown to be consistent with a broader body of econometric analysis. An important implication is that small emerging markets may be better equipped to transform their production structures and stimulate exports with foreign direct investment than by promoting broad domestic entrepreneurship. The authors find that policy changes in the host country can have very large effects if they alter the entry of multinationals or the behavior of large firms.

Suggested Citation

  • Caroline Freund & Theodore H. Moran, 2017. "Multinational Investors as Export Superstars: How Emerging-Market Governments Can Reshape Comparative Advantage," Working Paper Series WP17-1, Peterson Institute for International Economics.
    • Handle: RePEc:iie:wpaper:wp17-1
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    Citations

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    Cited by:

    1. Santos, Eleonora, 2017. "Externalities from FDI on domestic firms’ Productivity: A Literature Review for Developed Countries," MPRA Paper 88958, University Library of Munich, Germany.
    2. Alain Piveteau, 2020. "The automotive sector in Morocco. Local manifestation of a global dynamic or decisive industrial emergence? [Le secteur automobile au Maroc. Manifestation locale d'une dynamique mondiale ou émergen," Post-Print hal-03021343, HAL.
    3. Lectard, Pauline & Rougier, Eric, 2018. "Can Developing Countries Gain from Defying Comparative Advantage? Distance to Comparative Advantage, Export Diversification and Sophistication, and the Dynamics of Specialization," World Development, Elsevier, vol. 102(C), pages 90-110.
    4. Pauline Lectard & Alain Piveteau, 2019. "Breaking the export deadlock. Lessons from the analysis of the Moroccan export profile [Sortir de l'impasse exportatrice. Les enseignements de l'analyse du profil des exportations marocaines]," Post-Print hal-03031002, HAL.
    5. Russell Thomson & Prema-Chandra Athukorala, 2020. "Global production networks and the evolution of industrial capabilities: does production sharing warp the product space?," Oxford Economic Papers, Oxford University Press, vol. 72(3), pages 731-747.
    6. Sari, Dyah Wulan & Restikasari, Wenny & Ajija, Shochrul Rohmatul & Tarbiyah Islamia, Haura Azzara & Muchtar, Darmawati, 2021. "The Impacts of Foreign Direct Investment and Export Expansion on the Performance of the High-Tech Manufacturing Industry," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(2), pages 91-105.
    7. Bombarda,Pamela & Gamberoni,Elisa, 2019. "Diagonal Cumulation and Sourcing Decisions," Policy Research Working Paper Series 8884, The World Bank.
    8. Evgenia Tonkova & Sevdalina Hristova & Dancho Petrov, 2020. "Comparative Advantages in Attracting Investments - Contemporary View," Izvestia Journal of the Union of Scientists - Varna. Economic Sciences Series, Union of Scientists - Varna, Economic Sciences Section, vol. 9(3), pages 12-18, December.

    More about this item

    Keywords

    Foreign direct investment; development; integration; supply chains;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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