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Exports and FDI motivations: empirical evidence from US foreign subsidiaries

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  • C. Franco
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    The expected indirect benefits Foreign Direct Investments (FDI) are supposed to bring into the host countries are drawn mainly from studies at the microeconomic level. Empirical analyses examine whether FDI may be the source of productivity spillover effect on local firms and a new emerging literature analyses the effect with regard to the their export performance. However, conclusive results have not been reached so far. Two main shortcomings affect this literature: firstly, it is difficult to generalize results valid across countries; secondly, the role played by FDI motivations is largely disregarded. For these reasons, the aim of the paper is that of testing the effects of US FDI on export intensity at the sectoral level in 16 OECD countries over the period 1990-2001. Through these data, we are able to disentangle asset seeking and asset exploiting motivations and especially we are able to distinguish the channels through which the effect is going to occur. The findings show that taking into consideration the different motivations for which Multinational Enterprises (MNEs) invest abroad is relevant. The asset exploiting motivations, and in particular market seeking FDI, are those that affect export intensity to a greater extent.

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    Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 687.

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    Date of creation: Dec 2009
    Handle: RePEc:bol:bodewp:687
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    1. Aitken, Brian & Hanson, Gordon H. & Harrison, Ann E., 1997. "Spillovers, foreign investment, and export behavior," Journal of International Economics, Elsevier, vol. 43(1-2), pages 103-132, August.
    2. Davide Castellani & Antonello Zanfei, 2007. "Multinational companies and productivity spillovers: is there a specification error?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(14), pages 1047-1051.
    3. Grossman, Gene M. & Helpman, Elhanan & Szeidl, Adam, 2006. "Optimal integration strategies for the multinational firm," Journal of International Economics, Elsevier, vol. 70(1), pages 216-238, September.
    4. Bitzer, Jürgen & Geishecker, Ingo & Görg, Holger, 2008. "Productivity spillovers through vertical linkages: Evidence from 17 OECD countries," Economics Letters, Elsevier, vol. 99(2), pages 328-331, May.
    5. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October.
    6. Frances Ruane & Julie Sutherland, 2005. "Foreign Direct Investment and Export Spillovers: How Do Export Platforms Fare?," The Institute for International Integration Studies Discussion Paper Series iiisdp058, IIIS.
    7. Markusen, James R & Maskus, Keith E, 2002. "Discriminating among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
    8. Fosfuri, Andrea & Motta, Massimo, 1999. " Multinationals without Advantages," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 617-630, December.
    9. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    10. Greenaway, David & Sousa, Nuno & Wakelin, Katharine, 2004. "Do domestic firms learn to export from multinationals?," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1027-1043, November.
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