FDI Contribution to Capital Flows and Investment in Capacity
The paper discusses a theory of FDI, which captures a unique feature: hands-on management standards to react in real time to a changing economic environment in the firms that FDI investors gain control. Equipped with superior managerial skills, foreign direct investors outbid portfolio investors for the top productivity firms in a particular industry in which they have specialized in the source country. Consequently, FDI investors would make investment, both larger, and higher quality, than the domestic investors. The theory can explain both two-way FDI flows among developed countries, and one-way FDI flows from developed to developing countries. Gains to the host country from FDI stem from the informational value of FDI. The predictions of the theory are consistent with the evidence: larger FDI coefficient in the domestic investment and output growth regressions relative to the equity flow coefficient, reflects a more significant role for FDI in the domestic investment process.
|Date of creation:||Mar 2003|
|Date of revision:|
|Contact details of provider:|| Postal: 55th Floor , Two International Finance Centre , 8 Finance Street , Central, Hong Kong|
Phone: (852)2878 1978
Fax: (852)2878 7006
Web page: http://www.hkimr.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Blomstrom, Magnus & Globerman, Steven & Kokko, Ari, 1999.
"The determinants of host country spillovers from foreign direct investment: review and synthesis of the literature,"
SSE/EFI Working Paper Series in Economics and Finance
502, Stockholm School of Economics.
- Blomström, Magnus & Globerman, Steven & Kokko, Ari, 1999. "The Determinants of Host Country Spillovers from Foreign Direct Investment: Review and Synthesis of the Literature," SSE/EFI Working Paper Series in Economics and Finance 339, Stockholm School of Economics.
- Mody, Ashoka & Razin, Assaf & Sadka, Efraim, 2002.
"The Role of Information in Driving FDI: Theory and Evidence,"
CEPR Discussion Papers
3619, C.E.P.R. Discussion Papers.
- Assaf Razin & Ashoka Mody & Efraim Sadka, 2002. "The Role of Information in Driving FDI: Theory and Evidence," NBER Working Papers 9255, National Bureau of Economic Research, Inc.
- Oliver Hart, 2001.
Harvard Institute of Economic Research Working Papers
1924, Harvard - Institute of Economic Research.
- Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998.
"How does foreign direct investment affect economic growth?1,"
Journal of International Economics,
Elsevier, vol. 45(1), pages 115-135, June.
- Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
- Razin, Assaf & Sadka, Efraim, 2003.
"Gains from FDI inflows with incomplete information,"
Elsevier, vol. 78(1), pages 71-77, January.
- Assaf Razin & Efraim Sadka, 2002. "Gains from FDI Inflows with Incomplete Information," NBER Working Papers 9008, National Bureau of Economic Research, Inc.
- Rui Albuquerque, 2004.
"The Composition of International Capital Flows: Risk Sharing Through Foreign Direct Investment,"
- Albuquerque, Rui, 2003. "The composition of international capital flows: risk sharing through foreign direct investment," Journal of International Economics, Elsevier, vol. 61(2), pages 353-383, December.
- Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February.
- Blomström, Magnus & Globerman, Steve & Kokko, Ari, 2000. "The Determinants of Host Country Spillovers from Foreign Direct Investment," CEPR Discussion Papers 2350, C.E.P.R. Discussion Papers.
- Helpman, Elhanan, 1984.
"A Simple Theory of International Trade with Multinational Corporations,"
Journal of Political Economy,
University of Chicago Press, vol. 92(3), pages 451-71, June.
- Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Scholarly Articles 3445092, Harvard University Department of Economics.
- Barry P. Bosworth & Susan M. Collins, 1999. "Capital Flows to Developing Economies: Implications for Saving and Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 143-180.
- Kenneth A. Froot, 1991. "Japanese Foreign Direct Investment," NBER Working Papers 3737, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:hkm:wpaper:052003. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (HKIMR)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.