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Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects


  • Ryan, Michael
  • Raff, Horst


This paper uses a proportional hazard model to study foreign direct investment by Japanese manufacturers in Europe between 1970 and 1994. We divide each firm?s investment total into a sequence of individual investment decisions and analyze how firm-specific characteristics affect each decision. We find that total factor productivity is a significant determinant of a firm?s initial and subsequent investments. Parent-firm size does not have a significant influence on the initial decision to invest. Large firms simply have more investments than smaller firms. Other firm-specific characteristics, such as the R&D intensity, export share and keiretsu membership, also play a role in the investment process.

Suggested Citation

  • Ryan, Michael & Raff, Horst, 2007. "Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects," Economics Working Papers 2007-22, Christian-Albrechts-University of Kiel, Department of Economics.
  • Handle: RePEc:zbw:cauewp:5863

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    References listed on IDEAS

    1. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2003. "Export versus FDI," NBER Working Papers 9439, National Bureau of Economic Research, Inc.
    2. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, January.
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    13. Horst Raff & Michael Ryan & Frank Stähler, 2012. "Firm Productivity and the Foreign-Market Entry Decision," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(3), pages 849-871, September.
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    15. Head, Keith & Ries, John, 2003. "Heterogeneity and the FDI versus export decision of Japanese manufacturers," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 448-467, December.
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    Cited by:

    1. Peiming Wang & Joseph Alba & Donghyun Park, 2013. "Determinants of Different Modes of FDI: Firm-Level Evidence from Japanese FDI into the US," Open Economies Review, Springer, vol. 24(3), pages 425-446, July.
    2. Elisa Galeotti & Eva Ryšavá, 2008. "The endogeneity problem and fdi in transition: evidence from the privatized glass sector," Prague Economic Papers, University of Economics, Prague, vol. 2008(4), pages 319-339.
    3. Raff, Horst & Ryan, Michael & Stähler, Frank, 2009. "Whole vs. shared ownership of foreign affiliates," International Journal of Industrial Organization, Elsevier, vol. 27(5), pages 572-581, September.
    4. Conconi, Paola & Sapir, André & Zanardi, Maurizio, 2016. "The internationalization process of firms: From exports to FDI," Journal of International Economics, Elsevier, vol. 99(C), pages 16-30.
    5. Henning Mühlen & Peter Nunnenkamp, 2011. "FDI by early movers, followers and latecomers: timing of entry by German firms during transition in the Czech Republic," Applied Economics Letters, Taylor & Francis Journals, vol. 18(18), pages 1729-1734, December.
    6. Stähler, Frank & Ryan, Michael & Raff, Horst, 2007. "Whole versus Shared Ownership of Foreign Affiliates," Economics Working Papers 2007-18, Christian-Albrechts-University of Kiel, Department of Economics.
    7. Hecht, Veronika & Moritz, Michael & Noska, Patricia & Schäffler, Johannes, 2016. "Types of FDI and determinants of affiliate size: the classification makes the difference," IAB Discussion Paper 201625, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    8. Erdal Yalcin & Davide Sala, 2014. "Uncertain Productivity Growth and the Choice between FDI and Export," Review of International Economics, Wiley Blackwell, vol. 22(1), pages 189-208, February.

    More about this item


    Foreign direct investment; productivity; hazard model; Japan; keiretsu;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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