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How Important Is Foreign Direct Investment?

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  • Cantwell, John
  • Bellak, Christian

Abstract

The degree of multinationality of an economy's production is determined by the extent of production in other economies by domestically owned firms, and by production located in the economy in question by foreign-owned firms. In the absence of direct measures, international production (that is, production under foreign ownership) is normally measured at a national level by outward and inward foreign direct investment (FDI) stocks. Unfortunately, the existing practice of reporting FDI stocks on a historical cost basis (i.e. book values) is unsatisfactory, because it does not take into account the age distribution of stocks, thus making accurate international comparisons of FDI stocks almost impossible (see e.g. Cantwell 1984, 1992; Bellak and Cantwell 1996). The authors have reestimated the FDI stocks of Japan, Germany, the U.S., and the U.K. at replacement values using a perpetual inventory model (PIM). The results cast doubt on some of the conventional wisdoms about international production, derived from historic cost data. Copyright 1998 by Blackwell Publishing Ltd

Suggested Citation

  • Cantwell, John & Bellak, Christian, 1998. "How Important Is Foreign Direct Investment?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(1), pages 99-106, February.
  • Handle: RePEc:bla:obuest:v:60:y:1998:i:1:p:99-106
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    Cited by:

    1. Sjoerd Beugelsdijk & Jean-Fran├žois Hennart & Arjen Slangen & Roger Smeets, 2010. "Why and how FDI stocks are a biased measure of MNE affiliate activity," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(9), pages 1444-1459, December.
    2. Bellak, Christian, 1999. "Explaining foreign ownership by comparative and competitive advantage. Empirical evidence," Department of Economics Working Paper Series 96, WU Vienna University of Economics and Business.
    3. Bellak, Christian & Cantwell, John, 2004. "Revaluing the capital stock of international production," International Business Review, Elsevier, vol. 13(1), pages 1-18, February.
    4. K. M. Wacker, 2016. "(When) Should We Use Foreign Direct Investment Data to Measure the Activities of Multinational Corporations? Theory and Evidence," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 980-999, November.

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