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The spillover effects of outward foreign direct investment on home countries: evidence from the United States

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  • Jitao Tang

    (Ernst&Young LLP)

  • Rosanne Altshuler

    (Rutgers University)

Abstract

Most studies of foreign direct investment (FDI) spillovers focus on externalities of inward FDI to host country firms. However, spillovers may also be generated from outward FDI and flow to home country firms. We test for the presence of spillovers from U.S. multinational corporations to domestic U.S. firms in the same industry, downstream industries and upstream industries using firm level information from Standard and Poor’s Compustat data and industry level data on U.S. outward FDI from the U.S. Bureau of Economic Analysis. We find evidence of positive and significant spillovers flowing from multinational customers to their domestic suppliers. This is consistent with most previous studies of spillovers from inward FDI and may suggest a role for domestic policies that subsidize outward FDI. We also find that the presence of beneficial spillovers depends on several firm characteristics including exporting status, size and absorptive capacity.

Suggested Citation

  • Jitao Tang & Rosanne Altshuler, 2015. "The spillover effects of outward foreign direct investment on home countries: evidence from the United States," Working Papers 1503, Oxford University Centre for Business Taxation.
    • Handle: RePEc:btx:wpaper:1503
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    3. Zhoufu Yan & Shuntian Sui & Fangwei Wu & Li Cao, 2023. "The Impact of Outward Foreign Direct Investment on Product Quality and Export: Evidence from China," Sustainability, MDPI, vol. 15(5), pages 1-13, February.
    4. Lee, In Hyeock (Ian) & Hong, Eunsuk & Makino, Shige, 2020. "The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs)," International Business Review, Elsevier, vol. 29(3).
    5. Shinta R. I. Soekro & Triono Widodo, 2015. "Mapping And Determinants Of Intra-Asean Foreign Direct Investment (FDI): Indonesia Case Study," Working Papers WP/12/2015, Bank Indonesia.

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    More about this item

    Keywords

    Foreign Direct Investment; Home Country Spillovers; Absorptive Capacity;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts

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