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Determinants of Foreign Direct Investment in the Food-Processing Industry: A Comparative Analysis of Developed and Developing Economies

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  • Makki, Shiva S.
  • Somwaru, Agapi
  • Bolling, H. Christine

Abstract

This paper analyzes the determinants of foreign direct investments by the U.S. food-processing industry in developed and developing countries. We find that market size, per-capita income, and trade openness significantly affect U.S. food-processing firms' decisions to invest abroad, but their influence differs between developed and developing countries. Economic development is positively associated with FDI in developing countries but negatively associated in developed countries. Market size is a major determinant of FDI only in developed economies. Trade openness seems to be important for sales by U.S. foreign affiliates in both developed and developing countries and for exports to developed country markets.

Suggested Citation

  • Makki, Shiva S. & Somwaru, Agapi & Bolling, H. Christine, 2004. "Determinants of Foreign Direct Investment in the Food-Processing Industry: A Comparative Analysis of Developed and Developing Economies," Journal of Food Distribution Research, Food Distribution Research Society, vol. 35(3), pages 1-8, November.
    • Handle: RePEc:ags:jlofdr:27558
    DOI: 10.22004/ag.econ.27558
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    References listed on IDEAS

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    1. Munisamy Gopinath & Daniel Pick & Utpal Vasavada, 1999. "The Economics of Foreign Direct Investment and Trade with an Application to the U.S. Food Processing Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 442-452.
    2. Bolling, H. Christine & Neff, Steven & Handy, Charles R., 1998. "U.S. Foreign Direct Investment in the Western Hemisphere Processed Food Industry," Agricultural Economic Reports 34017, United States Department of Agriculture, Economic Research Service.
    3. Fung, K. C. & Iizaka, Hitomi & Parker, Stephen, 2002. "Determinants of U.S. and Japanese Direct Investment in China," Journal of Comparative Economics, Elsevier, vol. 30(3), pages 567-578, September.
    4. Goldberg, Linda S & Kolstad, Charles D, 1995. "Foreign Direct Investment, Exchange Rate Variability and Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 855-873, November.
    5. Kenneth A. Froot & Jeremy C. Stein, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1191-1217.
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    Cited by:

    1. Asgari, Mahdi, 2016. "U.S. Food Manufacturing Industry: The Choice of Exports vs. FDI," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230135, Southern Agricultural Economics Association.
    2. Manuel Fernandez & Mariam Mohamed Almaazmi & Robinson Joseph, 2020. "Foreign Direct Investment in Indonesia: An Analysis from Investors Perspective," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 102-112.
    3. Bortolotti, Luca & Marson, Marta & Saccone, Donatella, 2024. "Food and the forest: A spatial analysis on the nexus between foreign direct investment and deforestation," Forest Policy and Economics, Elsevier, vol. 169(C).
    4. Mankan M. Koné & Carl Gaigné & Lota D. Tamini, 2017. "Supply Uncertainty and Foreign Direct Investment in Agri-food Industry," Cahiers de recherche CREATE 2017-04, CREATE.
    5. Manuel Fernandez & Robinson Joseph & Vania Maria Fernandez, 2023. "An Empirical Study Identifying the Most Favored Foreign Direct Investment Inflows Destination in the Gulf Cooperation Council Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 13(2), pages 51-60, March.
    6. Bolling, Christine & Shane, Mathew & Roe, Terry, 2007. "Exchange Rates and U.S. Foreign Direct Investment in the Global Processed Food Industry," Agricultural and Resource Economics Review, Cambridge University Press, vol. 36(2), pages 230-238, October.
    7. Manuel Fernandez & Robinson Joseph & Vania Maria Fernandez, 2022. "Diagnosis of the Foreign Direct Investment Landscape in India," International Journal of Economics and Financial Issues, Econjournals, vol. 12(4), pages 72-83, July.
    8. Shih, Yu-Yuan & Lin, Chih-An, 2022. "Co-location with marketing value activities as manufacturing upgrading in a COVID-19 outbreak era," Journal of Business Research, Elsevier, vol. 148(C), pages 410-419.

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