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Outward FDI, merchandise and services trade: evidence from Singapore

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  • Wong, Koi Nyen
  • Goh, Soo Khoon

Abstract

This paper aims to explore the causality pattern between OFDI and major external trade components (i.e. exports and imports of merchandise as well as services) using Singapore as a case, since it is one of the largest outward investors in the Asian region, and is overtly trade-dependent. The findings reveal that there is evidence of OFDI-led trade hypothesis, particularly, merchandise exports and imports, an indication for OFDI to open up 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 nature of services is mainly to provide market presence in the consuming country. As such, Singaporean multinationals are likely to outsource their services either from the host country services sector or their own services-supporting subsidiaries that have been relocated abroad. The present study provides implications for policy formulation on strengthening the OFDI-services trade linkages.

Suggested Citation

  • Wong, Koi Nyen & Goh, Soo Khoon, 2011. "Outward FDI, merchandise and services trade: evidence from Singapore," MPRA Paper 35377, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:35377
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    Cited by:

    1. Soo Khoon Goh & Koi Nyen Wong, 2014. "Could Inward FDI Offset the Substitution Effect of Outward FDI on Domestic Investment? Evidence from Malaysia," Prague Economic Papers, Prague University of Economics and Business, vol. 2014(4), pages 413-425.
    2. Bojnec, Štefan & Ferto, Imre, 2014. "Outward Foreign Direct Iinvestments and Merchandise Exports: The European OECD Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 87-99, June.
    3. Rikap, Cecilia & Flacher, David, 2020. "Who collects intellectual rents from knowledge and innovation hubs? questioning the sustainability of the singapore model," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 59-73.
    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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    More about this item

    Keywords

    Outward FDI; multinationals; Singapore; Granger causality; merchandise and services trade;
    All these keywords.

    JEL classification:

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

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