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Networking and Foreign Direct Investment Activity

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Author Info
Bruce A. Blonigen () (University of Oregon Economics Department)
Rossitza B. Wooster () (California State University - Sacramento Economics Department)

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Abstract

We conduct an empirical investigation into whether networking effects affect foreign direct investment (FDI) activity. Using bibliographical information on CEOs’ birth and education locations, we are able to identify changes from U.S. to foreign-connected CEOs that occurred in U.S. manufacturing firms of the S&P 500 from 1992 through 1997. Robust to a variety of specifications, we find that a U.S. firm’s switch from a U.S.- to a foreign-connected CEO leads to substantial increases in the firm’s proportion of its assets and sales that are in foreign markets. In fact, our preferred specification indicates that foreign asset and sales proportions increase 30 and 50%, respectively, for the five years after such a CEO switch is made. This is in contrast to U.S.-to-U.S. CEO switches in our sample that show no evidence of changes in a firms’ foreign market participation.

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File URL: http://economics.uoregon.edu/papers/UO-2002-8_Blonigen_Networking_FDI.pdf
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Publisher Info
Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2002-8.

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Length: 26
Date of creation: 01 Jun 2001
Date of revision: 01 Sep 2002
Handle: RePEc:ore:uoecwp:2002-8

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Related research
Keywords: Multinational Enterprises; Networking; Corporate Governance;

Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
G3 - Financial Economics - - Corporate Finance and Governance

References listed on IDEAS
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  1. Pugel, Thomas A & Kragas, Erik S & Kimura, Yui, 1996. "Further Evidence on Japanese Direct Investment in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 208-13, May. [Downloadable!] (restricted)
  2. Bruce A. Blonigen & Christopher J. Ellis & Dietrich Fausten, 2000. "Industrial Groupings and Strategic FDI: Theory and Evidence," NBER Working Papers 8046, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Belderbos, Rene & Sleuwaegen, Leo, 1996. "Japanese Firms and the Decision to Invest Abroad: Business Groups and Regional Core Networks," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 214-20, May. [Downloadable!] (restricted)
  4. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June. [Downloadable!] (restricted)
    Other versions:
  5. Head, Keith & Ries, John & Swenson, Deborah, 1995. "Agglomeration benefits and location choice: Evidence from Japanese manufacturing investments in the United States," Journal of International Economics, Elsevier, vol. 38(3-4), pages 223-247, May. [Downloadable!] (restricted)
    Other versions:
  6. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September. [Downloadable!] (restricted)
  7. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June. [Downloadable!] (restricted)
  8. Berbard, A., 1997. "Why Some Firm Export," Working papers 97-26, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-48, June. [Downloadable!] (restricted)
  10. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December. [Downloadable!] (restricted)
  11. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December. [Downloadable!] (restricted)
  12. Gould, David M, 1994. "Immigrant Links to the Home Country: Empirical Implications for U.S. Bilateral Trade Flows," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 302-16, May. [Downloadable!] (restricted)
  13. René Belderbos, 1997. "Antidumping and tariff Jumping: Japanese firms’ DFI in the European union and the United States," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(3), pages 419-457, September. [Downloadable!] (restricted)
  14. Morck, Randall & Yeung, Bernard, 1992. "Internalization : An event study test," Journal of International Economics, Elsevier, vol. 33(1-2), pages 41-56, August. [Downloadable!] (restricted)
  15. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Keith Head & John Ries, 1998. "Immigration and Trade Creation: Econometric Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 47-62, February.
  17. Andrew B. Bernard & J. Bradford Jensen, 2004. "Why Some Firms Export," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 561-569, 04. [Downloadable!] (restricted)
    Other versions:
  18. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October. [Downloadable!] (restricted)
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