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The relationship between domestic and outward foreign direct investment: The role of industry-specific effects

Braunerhjelm, P; Oxelheim, Lars LU and Thulin, P (2005) In International Business Review 14(6). p.677-694
Abstract
Previous research has been inconclusive as regards the effect of outward foreign direct investment (FDI) on domestic investments. In this article, we show that this inconclusiveness can be explained at a disaggregated level as a function of the way industries are organized. Based on a simple theoretical framework including monitoring and trade costs, we argue that a complementary relationship can be expected to prevail in vertically integrated industries, whereas a substitutionary relationship can be expected in horizontally organized production. The empirical analysis confirms a significant difference between the two categories of industry as regards the impact of outward FDI on domestic investment. The results may thus have profound... (More)
Previous research has been inconclusive as regards the effect of outward foreign direct investment (FDI) on domestic investments. In this article, we show that this inconclusiveness can be explained at a disaggregated level as a function of the way industries are organized. Based on a simple theoretical framework including monitoring and trade costs, we argue that a complementary relationship can be expected to prevail in vertically integrated industries, whereas a substitutionary relationship can be expected in horizontally organized production. The empirical analysis confirms a significant difference between the two categories of industry as regards the impact of outward FDI on domestic investment. The results may thus have profound policy implications. JEL no. F12, F21, F23, G34. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
industry-specific effects, FDI, gross domestic investment
in
International Business Review
volume
14
issue
6
pages
677 - 694
publisher
Elsevier
external identifiers
  • wos:000235834000002
  • scopus:29544452526
ISSN
1873-6149
DOI
10.1016/j.ibusrev.2005.09.004
language
English
LU publication?
yes
id
2fd109cf-0bc4-4bad-a93e-3052d9234f44 (old id 893987)
date added to LUP
2008-01-11 12:14:58
date last changed
2017-01-08 03:54:05
@article{2fd109cf-0bc4-4bad-a93e-3052d9234f44,
  abstract     = {Previous research has been inconclusive as regards the effect of outward foreign direct investment (FDI) on domestic investments. In this article, we show that this inconclusiveness can be explained at a disaggregated level as a function of the way industries are organized. Based on a simple theoretical framework including monitoring and trade costs, we argue that a complementary relationship can be expected to prevail in vertically integrated industries, whereas a substitutionary relationship can be expected in horizontally organized production. The empirical analysis confirms a significant difference between the two categories of industry as regards the impact of outward FDI on domestic investment. The results may thus have profound policy implications. JEL no. F12, F21, F23, G34.},
  author       = {Braunerhjelm, P and Oxelheim, Lars and Thulin, P},
  issn         = {1873-6149},
  keyword      = {industry-specific effects,FDI,gross domestic investment},
  language     = {eng},
  number       = {6},
  pages        = {677--694},
  publisher    = {Elsevier},
  series       = {International Business Review},
  title        = {The relationship between domestic and outward foreign direct investment: The role of industry-specific effects},
  url          = {http://dx.doi.org/10.1016/j.ibusrev.2005.09.004},
  volume       = {14},
  year         = {2005},
}