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Foreign Firms and Local Communities

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  • Bruce Blonigen
  • Cheyney O'Fallon

Abstract

The literature on the effects of foreign direct investment (FDI) and activities of multinational enterprises (MNEs) on host-countries has been almost exclusively focused on issues of productivity, growth and wages. We argue that this leaves quite a bit of important unexplored areas of inquiry, particularly those connected with the interactions of local communities and governments with MNEs. As an example, we provide a novel analysis of local corporate philanthropy, which shows significant differences between local- and foreign-owned corporations. We find that foreign-owned enterprises are less likely to give, but that when they do give, it is substantially more in magnitude than domestic firms, everything else equal. This evidence is consistent with the hypothesis that foreign-owned firms would prefer to use corporate social responsibility (CSR) activities on a more international scale, but will strategically use CSR activities for public relation motives when the MNE faces greater local scrutiny and/or bias.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17282.

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Date of creation: Aug 2011
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Handle: RePEc:nbr:nberwo:17282

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  1. Bruce A. Blonigen & Robert C. Feenstra, . "Protectionist Threats And Foreign Direct Investment," Department of Economics 96-01, California Davis - Department of Economics.
  2. Galina An & Keith E. Maskus & Thitima Puttitanun, 2008. "Duration of Rent Extraction and the Entry Mode Decision of Multinational Enterprises," Review of Development Economics, Wiley Blackwell, vol. 12(4), pages 861-876, November.
  3. Blonigen, Bruce A & Figlio, David N, 1998. "Voting for Protection: Does Direct Foreign Investment Influence Legislator Behavior?," American Economic Review, American Economic Association, vol. 88(4), pages 1002-14, September.
  4. Aitken, B. & Harrison, A. & Lipsey, R.E., 1995. "Wages and Foreign Ownership: A Comparative Study of Mexico, Venezuela, and the United States," Papers 95-21, Columbia - Graduate School of Business.
  5. Lee G. Branstetter & Robert C. Feenstra, 1999. "Trade and Foreign Direct Investment in China: A Political Economy Approach," NBER Working Papers 7100, National Bureau of Economic Research, Inc.
  6. Branstetter, Lee, 2006. "Is foreign direct investment a channel of knowledge spillovers? Evidence from Japan's FDI in the United States," Journal of International Economics, Elsevier, vol. 68(2), pages 325-344, March.
  7. Durham, J.B.J. Benson, 2004. "Absorptive capacity and the effects of foreign direct investment and equity foreign portfolio investment on economic growth," European Economic Review, Elsevier, vol. 48(2), pages 285-306, April.
  8. Lisa Calvano, 2008. "Multinational Corporations and Local Communities: A Critical Analysis of Conflict," Journal of Business Ethics, Springer, vol. 82(4), pages 793-805, November.
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Cited by:
  1. Dierk Herzer, Peter Nunnenkamp, 2012. "FDI and health in developed economies: a panel cointegration analysis," Kiel Working Papers 1756, Kiel Institute for the World Economy.

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