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

  • Gonzalez-Eiras, Martin


    (Universidad de San Andres)

  • Prado, Jr., Jose Mauricio

    (Institute for International Economic Studies, Stockholm University)

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.

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Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 753.

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Length: 29 pages
Date of creation: 06 Aug 2007
Date of revision:
Handle: RePEc:hhs:iiessp:0753
Contact details of provider: Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Phone: +46-8-162000
Fax: +46-8-161443
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