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Foreign Direct Investment, Host Country Productivity And Export: The Case Of U.S. And Japanese Multinational Affiliates

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  • Adugna Lemi

    (Department of Economics and Finance, College of Business, Winona State University)

Abstract

The literature on the transfer of technology from FDI to host country firms is growing rapidly. Most of the studies find that there are positive spillover effects from FDI flow to host country firms in advanced economies. The result for the case of FDI recipient developing economies is mixed. The purpose of this study is to analyze the role that foreign direct investment from the U.S. and Japan plays in affecting developing countries¡¯ productivity, and export. Trade and production dataset by industrial groups and disaggregated U.S. and Japanese FDI data are used to empirically test presence of spillover effects on labor productivity and export. The results of the study show that positive productivity effects from U.S. and Japanese FDI firms are not empirically supported for the case of sample developing countries. The presence of FDI firms from all source countries and the number of U.S. total FDI and U.S. manufacturing FDI firms increase exports of host countries to the rest of the world. On the other hand, productivity is enhanced by foreign portfolio investment, availability of skilled manpower, capital intensity of industries and the number of bilateral investment treaties signed by host countries. Official development assistance and official aid have significantly negative effect on host country productivity, value added and export.

Suggested Citation

  • Adugna Lemi, 2004. "Foreign Direct Investment, Host Country Productivity And Export: The Case Of U.S. And Japanese Multinational Affiliates," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(1), pages 163-187, June.
    • Handle: RePEc:jed:journl:v:29:y:2004:i:1:p:163-187
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    References listed on IDEAS

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    1. Aitken, Brian & Hanson, Gordon H. & Harrison, Ann E., 1997. "Spillovers, foreign investment, and export behavior," Journal of International Economics, Elsevier, vol. 43(1-2), pages 103-132, August.
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    Cited by:

    1. Marc Lautier & Francois Moreaub, 2012. "Domestic Investment And Fdi In Developing Countries: The Missing Link," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(3), pages 1-23, September.
    2. Ana S. Trbovich & Jana Subotić & Jasna Matić, 2013. "Foreign Direct Investment As Export Facilitator In Serbia’S Apparel Industry," Serbian Association of Economists Journal, SAE - Serbian Association of Economists, issue 5-6, pages 339-353, August.
    3. Soma Roy, 2011. "Income Distribution, Spillover Effects And Choice Of Product Quality," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 36(2), pages 61-86, June.
    4. Sergio Alessandrini, 2014. "Employment creation through inward FDI in the EMFTA and employment linkages within sectors," Chapters, in: Carlo Altomonte & Massimiliano Ferrara (ed.), The Economic and Political Aftermath of the Arab Spring, chapter 3, pages 79-105, Edward Elgar Publishing.
    5. VPhuong V. Nguyen, Khoa T. Tran, Nga Thuy Thanh Le and Hoa Doan Xuan Trieu, 2020. "Examining FDI Spillover Effects on Productivity Growth: Firm-Level Evidence from Vietnam," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 45(1), pages 97-121, March.

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    More about this item

    Keywords

    Foreign Direct Investment; Productivity; Developing Countries; USA; Japan;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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