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GTAP Resource #1583

"Determinants of Outward FDI: Role of Technological Intensity, Spillovers and Intangible Assets"
by Sanyal, Prabuddha

This study investigates whether foreign direct investment (FDI) is motivated by technological intensity, technology externalities (spillovers) and intangible asset acquisition motives. The analysis is initially undertaken for U.S. outward FDI for a sample of developed economies using the panel data estimation technique over the period 1982 to 2000. The results indicate that there is not just one set of factors to explain FDI undertaken by U.S.
MNEs. Technological intensity in the host country is a significant determinant of outward FDI, as are other motives, such as market access and tariff-jumping motives. The results also show initially foreign markets are served through exports, and later through direct investment indicating the presence of horizontal FDI. Once the spillover and intangible asset acquisition motives are taken into account, the market access motive in outward FDI disappears. The existence of a non-linear relationship between spillovers from R&D activity and the incentive to undertake FDI is demonstrated. Additionally, a sectoral level analysis reveals that intellectual property rights (IPR) has positive and significant impact on the high technological sectors such as chemicals and machinery sectors, and strengthening IPR in developing host countries has no significant impact in inward FDI.

Keywords: R&D Spillovers, Technological Intensity, FDI, Intangible Asset Acquisition, Intellectual Property Rights.

JEL classification code: F23, O30, O31, F23, G320.

Resource Details (Export Citation) GTAP Keywords
Category: 2004 Conference Paper
Status: Published
By/In: Presented at the 7th Annual Conference on Global Economic Analysis, Washington DC, USA
Date: 2004
Created: Sanyal, P. (5/18/2004)
Updated: Bacou, M. (5/27/2004)
Visits: 2,320
- Foreign direct investment

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