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Foreign Takeovers And New Investments In The United States

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  • EDWARD JOHN RAY

Abstract

This study is unique in several respects. First, it reviews the characteristics of the top 10 industries targeted for foreign direct investment (FDI) activity in the United States between 1979 and 1987. It analyzes both overall FDI activity and new plant and expansion FDI activity. The study summarizes and tests alternative hypotheses regarding the determinants of FDI in the United States by all countries, by the United Kingdom, by the European Community, by Japan, and by Canada. Large and growing product markets in an expanding economy have attracted FDI in the United States. Exchange rate movements have prompted opportunistic decisions to invest in U.S. production facilities. Investors' superior management skills appear to have prompted takeovers, while efforts to realize technological advantages of new physical capital and of relatively large operating plants have fostered plant and expansion investments. Evidence exists that a desire to circumvent current—but not potential—trade restrictions has motivated foreign direct investment. FDI activities are not associated with concentrated or heavily unionized industries. Highly protected industries have attracted heavier equity FDI by Japan and heavier new plant FDI by all sources and Canada. No evidence exists that FDI in the United States by Japan or anyone else is targeted to undercut union‐dominated firms or to arrest the spread of protectionist trade policies.

Suggested Citation

  • Edward John Ray, 1991. "Foreign Takeovers And New Investments In The United States," Contemporary Economic Policy, Western Economic Association International, vol. 9(1), pages 59-71, January.
    • Handle: RePEc:bla:coecpo:v:9:y:1991:i:1:p:59-71
    DOI: 10.1111/j.1465-7287.1991.tb00316.x
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    References listed on IDEAS

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    1. Ray, Edward John, 1977. "Foreign Direct Investment in Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 283-297, April.
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    Cited by:

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    2. Henderson, Dennis R. & Handy, Charles & Neff, Steven A., 1997. "Globalization of the Processed Foods Market," Agricultural Economic Reports 262044, United States Department of Agriculture, Economic Research Service.

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