 FDI Flows and Domestic Investment: OverviewCESifo Economic Studies, 2003, vol. 49, issue 3, 415-428 Abstract: The paper surveys theories of FDI and supporting evidence. A new theory flashes out a unique feature of FDI: hands on management style that enables investors to react in real time to changing economic environments. Equipped with superior intangible know how in screening firms, foreign direct investors can out bid portfolio equity investors for the top productivity firms. The implications of the theory are that investment is both more efficient (namely, made dependent on the firm-specific productivity) and, in plausible cases, also larger. The theory can explain both two way flows of FDI among developed economies, and one way flows between developed and developing economies. These predictions of the theory are consistent with panel data: larger FDI coefficients in domestic investment and output growth regressions, than those of the debt and portfolio equity coefficients. They are also consistent with gravity equations which explain FDI inflows by informational variables and degree of corporate transparency in the host country.(JEL F2) Date: 2003 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:cesifo:v:49:y:2003:i:3:p:415-428. Ordering information: This journal article can be ordered from Access Statistics for this article CESifo Economic Studies is currently edited by Panu Poutvaara More articles in CESifo Economic Studies from CESifo Group Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC. |
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