EconPapers    
Economics at your fingertips  
 

Direct Versus Indirect FDI: Impact On Domestic Exports And Employment

Christian Bellak and Wilfried Altzinger ()

Working Papers from Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness

Abstract: One of the specific characteristics of Austrian Foreign Direct Investment (FDI) abroad is that a large part is carried out by firms, which themselves are affiliates of foreign Multinational Enterprises (MNEs). Such investment is termed indirect FDI in order to distinguish it from direct FDI, made by Austrian-owned firms. The objective of this paper is to analyse, whether the relatively better domestic employment performance of domestic firms (direct FDI) compared to foreign-owned firms (indirect FDI) can be linked to FDI abroad. Based on an analysis of the sales and trade structure of a sample of Austrian investors in Central and East European Countries (CEECs), this paper tests the hypothesis that these two groups of investors have different motives to invest in CEECs and therefore their activities in CEECs differ by type (sales affiliate, production abroad) and consequently the employment effects at home. Regression results confirm that direct FDI are more strongly determined by labour costs and exhibit an employment pattern related to a deeper international division of labour (including production), while indirect FDI is based relatively more on market seeking investment. Empirical results also confirm that employment effects at home differ. The positive (negative) effect of one additional unit of parent (affiliate) sales on domestic employment for indirect FDI compared to direct FDI is larger (smaller). The - despite this empirical fact - relatively better domestic employment performance of direct FDI is explained by their superior sales performance, resulting from restructuring their international division of labour.

Keywords: Foreign; Direct; Investment (search for similar items in EconPapers)
Date: 1999-11
New Economics Papers: this item is included in nep-ifn
Note: PDF Document
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.wu-wien.ac.at/inst/vw1/gee/papers/gee!wp09.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.wu-wien.ac.at/inst/vw1/gee/papers/gee!wp09.pdf [301 Moved Permanently]--> https://www.wu.ac.at/inst/vw1/gee/papers/gee!wp09.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwgee:geewp09

Access Statistics for this paper

More papers in Working Papers from Vienna University of Economics and Business Research Group: Growth and Employment in Europe: Sustainability and Competitiveness Welthandelsplatz 1, 1020 Vienna, Austria.
Bibliographic data for series maintained by Department of Economics ().

 
Page updated 2025-03-20
Handle: RePEc:wiw:wiwgee:geewp09