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The relationship between domestic and outward foreign direct investment: The role of industry-specific effects
Royal Institute of Technology, Stockholm, Sweden.
Lund Institute of Economic Research, Lund University, P.O. Box 7080, SE-220 07 Lund, Sweden.
Linköping University, Department of Management and Engineering. Linköping University, The Institute of Technology.
2005 (English)In: International Business Review, ISSN 0969-5931, Vol. 14, no 6, 677-694 p.Article in journal (Refereed) Published
Abstract [en]

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. © 2005 Elsevier Ltd. All rights reserved.

Place, publisher, year, edition, pages
2005. Vol. 14, no 6, 677-694 p.
Keyword [en]
FDI, Gross domestic investment, Industry-specific effects
National Category
Engineering and Technology
URN: urn:nbn:se:liu:diva-50367DOI: 10.1016/j.ibusrev.2005.09.004OAI: diva2:271263
Available from: 2009-10-11 Created: 2009-10-11 Last updated: 2012-01-06

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ReferencesLink to record
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