Firm-Specific Assets and the Link Between Exchange Rates and Foreign Direct Investment

Bruce Blonigen

Chapter 3 in Foreign Direct Investment, 2019, pp 89-120 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Foreign direct investment (FDI) theory and empirical studies have generated mixed support for a link between exchange rates and FDI. This paper argues that exchange rate movements may affect acquisition FDI because acquisitions involve firm-specific assets which can generate returns in currencies other than that used for purchase. Using data on Japanese acquisitions in the United States across 3-digit SIC industries from 1975–1992, maximum-likelihood estimates from discrete dependent variable models support the hypothesis that real dollar depreciations make Japanese acquisitions more likely in U.S. industries, particularly those which more likely have firm-specific assets.

Keywords: Foreign Direct Investment; Multinational Enterprises; Mergers and Acquisitions; Greenfield; Trade Policy; Taxation; Spillovers; Offshoring; Wage Inequality; Firm-Specific Assets; Antidumping; Tariff-jumping; Industrial Organization; Ownership-Location-Internalization Theory (search for similar items in EconPapers)
JEL-codes: F02 F13 F6 (search for similar items in EconPapers)
Date: 2019
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Journal Article: Firm-Specific Assets and the Link between Exchange Rates and Foreign Direct Investment (1997)
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