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Outward FDI, merchandise and services trade: evidence from Singapore

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  • Koi Nyen Wong
  • Soo Khoon Goh

Abstract

This paper aims to explore the causality pattern between outward foreign direct investment (OFDI) and major external trade components (i.e. exports and imports of merchandise as well as services) using Singapore as a case study, since it is one of the largest outward investors in the Asian region and it is overtly trade-dependent. The findings reveal that there is evidence of an OFDI-led trade hypothesis, particularly with regard to merchandise exports and imports, which is an indication OFDI opens important channels for intra-firm trade activities, home country sourcing and backward integration. However, there is no evidence of causality relationships between Singapore's OFDI and services trade because the purpose of such services is mainly to provide a market presence in the consuming country. As such, Singaporean multinationals are likely to outsource their services either from the host country services sector or from their own services-supporting subsidiaries that have been relocated abroad. The present study provides implications for policy formulation to strengthen OFDI-services trade linkages.

Suggested Citation

  • Koi Nyen Wong & Soo Khoon Goh, 2013. "Outward FDI, merchandise and services trade: evidence from Singapore," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(2), pages 276-291, April.
    • Handle: RePEc:taf:jbemgt:v:14:y:2013:i:2:p:276-291
    DOI: 10.3846/16111699.2012.703964
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    4. Bee Wah Tan & Soo Khoon Goh & Koi Nyen Wong, 2016. "The effects of inward and outward FDI on domestic investment: evidence using panel data of ASEAN–8 countries," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 17(5), pages 717-733, September.
    5. Yongrong Xin & Aftab Hussain Tabasam & Zhenling Chen & Aysha Zamir & Carlos Samuel Ramos-Meza, 2024. "Analyzing the Impact of Foreign Direct Investment, Energy Consumption on Services Exports, and Growth of the Services Sector: Evidence from SAARC Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 5709-5728, June.
    6. Yuanyuan Kou & Huiying Chen & Kai Liu & Huajie Xu, 2023. "Multinational Corporations and Technological Innovation Development of China’s High-Tech Industries: A Heterogeneity-Based Threshold Effect Analysis," Sustainability, MDPI, vol. 15(9), pages 1-19, April.
    7. Camilleri, Silvio John & Falzon, Joseph, 2013. "The Challenges of Productivity Growth in the Small Island States of Europe: A Critical Look of Malta and Cyprus," MPRA Paper 62489, University Library of Munich, Germany.

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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