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Foreign Direct Investment in Producer Services: Theory and Empirical Evidence

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  • Horst Raff
  • Marc von der Ruhr

Abstract

This paper examines the pattern of foreign direct investment (FDI) in producer services. We develop a model of FDI in these services and test its predictions using panel data on U.S.FDI in 25 host countries from 1976 to 1995. We find evidence that, in addition to governmental and cultural barriers, producer-service firms may face informational barriers to entry into foreign markets. The presence of such barriers provides a possible explanation for the observation that producer-service FDI tends to follow FDI by downstream industries.

Suggested Citation

  • Horst Raff & Marc von der Ruhr, 2001. "Foreign Direct Investment in Producer Services: Theory and Empirical Evidence," CESifo Working Paper Series 598, CESifo.
    • Handle: RePEc:ces:ceswps:_598
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    Cited by:

    1. Basuil, Dynah A. & Datta, Deepak K., 2019. "Effects of Firm-specific and Country-specific Advantages on Relative Acquisition Size in Service Sector Cross-Border Acquisitions: An Empirical Examination," Journal of International Management, Elsevier, vol. 25(1), pages 66-80.
    2. Ishikawa, Jota & Morita, Hodaka & Mukunoki, Hiroshi, 2010. "FDI in post-production services and product market competition," Journal of International Economics, Elsevier, vol. 82(1), pages 73-84, September.
    3. Joseph Daniels & Walid Hejazi & Marc von der Ruhr, 2005. "Regional vs. Global Financing Strategies for U.S. MNEs," Working Papers and Research 0511, Marquette University, Center for Global and Economic Studies and Department of Economics.
    4. Van Long, Ngo & Riezman, Raymond & Soubeyran, Antoine, 2005. "Fragmentation and services," The North American Journal of Economics and Finance, Elsevier, vol. 16(1), pages 137-152, March.
    5. Paul J. J. Welfens & Fabian J. Baier, 2018. "BREXIT and Foreign Direct Investment: Key Issues and New Empirical Findings," IJFS, MDPI, vol. 6(2), pages 1-21, April.
    6. Ngo Van Long & Ray Riezman & Antoine Soubeyran, 2001. "Fragmentation, Outsourcing and the Service Sector," CIRANO Working Papers 2001s-43, CIRANO.
    7. Lale Berko¨z & Engin Eyuboglu, 2007. "Intrametropolitan Location of Producer-service FDI in Istanbul," European Planning Studies, Taylor & Francis Journals, vol. 15(3), pages 357-381, April.
    8. Bhabani Shankar Nayak & Dominik Scheib, 2020. "Cultural logic of German foreign direct investment (FDI) in service sector," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-13, December.

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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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