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Determinants of Capital Intensive and R&D Intensive Foreign Direct Investment

Author

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  • Gonzalez-Eiras, Martin

    () (Universidad de San Andres)

  • Prado, Jr., Jose Mauricio

    (Institute for International Economic Studies, Stockholm University)

Abstract

We study the determinants of capital intensity and technology content of foreign direct investment, an important economic driving force for developing countries. For this purpose, we use sectoral industry data on U.S. foreign investment abroad, and data on host countries' institutional characteristics, like investment climate, protection of property rights, labor standards and constitutional arrangements. Our regressions show that better protection of property rights has a significant positive effect on R&D but not on capital intensive capital flows. There is evidence that an increase in workers' bargaining power results in a reduction of capital and technologically intensive foreign investment. And although the evidence with respect to constitutional arrangements is not very strong, presidential regimes appear to be less able than parliamentary ones to deliver policies attracting R&D intensive capital flows. This is consistent with recent research on the effects of constitutional arrangements on economic growth.

Suggested Citation

  • Gonzalez-Eiras, Martin & Prado, Jr., Jose Mauricio, 2007. "Determinants of Capital Intensive and R&D Intensive Foreign Direct Investment," Seminar Papers 753, Stockholm University, Institute for International Economic Studies.
  • Handle: RePEc:hhs:iiessp:0753
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    More about this item

    Keywords

    FDI;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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