IDEAS home Printed from https://ideas.repec.org/p/zbw/ifwkwp/1546.html
   My bibliography  Save this paper

Domestic repercussions of different types of FDI: firm-level evidence for Taiwanese manufacturing

Author

Listed:
  • Liu, Wan-Hsin
  • Nunnenkamp, Peter

Abstract

It is widely feared that outward FDI gradually hollows out domestic manufacturing and displaces local workers. We address this concern by drawing on exceptionally informative firm-specific data on Taiwanese multinationals in manufacturing. In particular, we assess whether repercussions at home depend on the size, location and type of outward FDI. We control for firm heterogeneity and estimate ordered probit models with the firms' own assessment of domestic production and employment effects as dependent variables. We find that the probability of negative effects increases slightly with the size of FDI. The effects of locating in China differ from those of locating in advanced countries not only in size but also in sign. In contrast to vertical and export-platform FDI, employment effects of horizontal FDI tend to be positive. The quantitative impact is typically small, however.

Suggested Citation

  • Liu, Wan-Hsin & Nunnenkamp, Peter, 2009. "Domestic repercussions of different types of FDI: firm-level evidence for Taiwanese manufacturing," Kiel Working Papers 1546, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1546
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/28373/1/609086316.PDF
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kleinert, Jörn & Toubal, Farid, 2007. "The impact of locating production abroad on activities at home," Tübinger Diskussionsbeiträge 314, University of Tübingen, School of Business and Economics.
    2. Blomstrom, Magnus & Fors, Gunnar & Lipsey, Robert E, 1997. "Foreign Direct Investment and Employment: Home Country Experience in the United States and Sweden," Economic Journal, Royal Economic Society, vol. 107(445), pages 1787-1797, November.
    3. Holger Görg & Henning Mühlen & Peter Nunnenkamp, 2010. "Firm Heterogeneity, Industry Characteristics and Types of FDI: The Case of German FDI in the Czech Republic," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 65(3), pages 273-295, September.
    4. repec:bla:reviec:v:9:y:2001:i:1:p:108-22 is not listed on IDEAS
    5. Karolina Ekholm & Rikard Forslid & James R. Markusen, 2021. "Export-Platform Foreign Direct Investment," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 6, pages 111-130, World Scientific Publishing Co. Pte. Ltd..
    6. Liu, Bih Jane & Huang, Fung-Mey, 2005. "Outward Direct Investment, Reverse Import, and Domestic Production : Evidence from Taiwanese Manufacturing Firms," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 46(1), pages 65-84, June.
    7. Marin, Dalia, 2004. "‘A Nation of Poets and Thinkers’ - Less So with Eastern Enlargement? Austria and Germany," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 77, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    8. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    9. Sascha O. Becker & Karolina Ekholm & Robert Jäckle & Marc-Andreas Muendler, 2005. "Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(4), pages 693-731, December.
    10. Chen, Tain-Jy, 1992. "Determinants of Taiwan's direct foreign investment : The case of a newly industrializing country," Journal of Development Economics, Elsevier, vol. 39(2), pages 397-407, October.
    11. repec:bla:reviec:v:8:y:2000:i:3:p:448-61 is not listed on IDEAS
    12. Holger Gorg & Henning Muhlen & Peter Nunnenkamp, 2010. "FDI Liberalisation, Firm Heterogeneity and Foreign Ownership: German Firm Decisions in Reforming India," Journal of Development Studies, Taylor & Francis Journals, vol. 46(8), pages 1367-1384.
    13. Qiu, Larry D. & Tao, Zhigang, 2001. "Export, foreign direct investment, and local content requirement," Journal of Development Economics, Elsevier, vol. 66(1), pages 101-125, October.
    14. Bruce A. Blonigen, 2019. "In Search of Substitution Between Foreign Production and Exports," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 9, pages 293-323, World Scientific Publishing Co. Pte. Ltd..
    15. Henrik Braconier & Karolina Ekholm, 2000. "Swedish Multinationals and Competition from High‐ and Low‐Wage Locations," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 448-461, August.
    16. Edward C. Norton & Hua Wang & Chunrong Ai, 2004. "Computing interaction effects and standard errors in logit and probit models," Stata Journal, StataCorp LP, vol. 4(2), pages 154-167, June.
    17. Jozef Konings & Alan Patrick Murphy, 2006. "Do Multinational Enterprises Relocate Employment to Low-Wage Regions? Evidence from European Multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(2), pages 267-286, July.
    18. Chen, Tain-Jy & Ku, Ying-Hua, 2000. "The effect of foreign direct investment on firm growth: the case of Taiwan's manufacturers," Japan and the World Economy, Elsevier, vol. 12(2), pages 153-172, May.
    19. Keith Head & John Ries, 2001. "Overseas Investment and Firm Exports," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 108-122, February.
    20. Giorgio Barba Navaretti & Davide Castellani & Anne-Celia Disdier, 2006. "How Does Investing in Cheap Labour Countries Affect Performance at Home? France and Italy," Development Working Papers 215, Centro Studi Luca d'Agliano, University of Milano.
    21. Robert E. Lipsey, 2002. "Home and Host Country Effects of FDI," NBER Working Papers 9293, National Bureau of Economic Research, Inc.
    22. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2005. "Vertical Production Networks in Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 664-678, November.
    23. repec:hhs:iuiwop:490 is not listed on IDEAS
    24. Mihir A. Desai & C. Fritz Foley & James R. Hines, 2009. "Domestic Effects of the Foreign Activities of US Multinationals," American Economic Journal: Economic Policy, American Economic Association, vol. 1(1), pages 181-203, February.
    25. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    26. Ito, Takatoshi & Rose, Andrew K. (ed.), 2005. "International Trade in East Asia," National Bureau of Economic Research Books, University of Chicago Press, number 9780226378961.
    27. Yih-Chyi Chuang & Chi-Mei Lin, 1999. "Foreign direct investment, R&D and spillover efficiency: Evidence from Taiwan's manufacturing firms," Journal of Development Studies, Taylor & Francis Journals, vol. 35(4), pages 117-137.
    28. Marin, Dalia, 2004. "'A Nation of Poets and Thinkers' - Less So with Eastern Enlargement? Austria and Germany," Discussion Papers in Economics 329, University of Munich, Department of Economics.
    29. Laura Alfaro & Andrew Charlton, 2009. "Intra-industry Foreign Direct Investment," American Economic Review, American Economic Association, vol. 99(5), pages 2096-2119, December.
    30. Head, Keith & Ries, John, 2002. "Offshore production and skill upgrading by Japanese manufacturing firms," Journal of International Economics, Elsevier, vol. 58(1), pages 81-105, October.
    31. Robert E. Lipsey & Eric D. Ramstetter & Magnus Blomstrom, 2000. "Outward FDI and Parent Exports and Employment: Japan, the United States, and Sweden," NBER Working Papers 7623, National Bureau of Economic Research, Inc.
    32. David Greenaway & Douglas R. Nelson (ed.), 2001. "Globalization and Labour Markets," Books, Edward Elgar Publishing, volume 0, number 1803.
    33. Ellingsen, Gaute & Likumahuwa, Winfried & Nunnenkamp, Peter, 2006. "Outward FDI by Singapore: a different animal?," Open Access Publications from Kiel Institute for the World Economy 3947, Kiel Institute for the World Economy (IfW Kiel).
    34. Alexander HIJZEN & INUI Tomohiko & TODO Yasuyuki, 2007. "The Effects of Multinational Production on Domestic Performance: Evidence from Japanese Firms," Discussion papers 07006, Research Institute of Economy, Trade and Industry (RIETI).
    35. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    36. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.
    37. Debaere, Peter & Lee, Hongshik & Lee, Joonhyung, 2006. "Does Where You Go Matter? The Impact of Outward Foreign Direct Investment on Multinationals' Employment at Home," CEPR Discussion Papers 5737, C.E.P.R. Discussion Papers.
    38. Takatoshi Ito & Andrew K. Rose, 2005. "International Trade in East Asia," NBER Books, National Bureau of Economic Research, Inc, number ito_05-1.
    39. Becker Sascha O & Muendler Marc-Andreas, 2008. "The Effect of FDI on Job Security," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-46, April.
    40. Chung, Chin, 1996. "Double-Edged Trade Effect of Foreign Direct Investment and Firm-Specific Assets: Evidence From the Chinese Trio," Discussion Papers 256179, Chung-Hua Institution for Economic Research.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mitsuo Inada & Yung-Hsing Guo, 2016. "Heterogeneous Impacts of a Change in Chinese FDI Regulations on Domestic Market Outcomes: Empirical Evidence from Taiwanese Plant Data," KIER Working Papers 934, Kyoto University, Institute of Economic Research.
    2. Santos, Eleonora, 2017. "Assessing the Impact of Foreign Direct Investment on Domestic Manufacturing Firms’ Productivity: A Database for Portugal," MPRA Paper 88959, University Library of Munich, Germany.
    3. Sosa Andrés, Maximiliano & Nunnenkamp, Peter & Busse, Matthias, 2013. "What drives FDI from non-traditional sources? A comparative analysis of the determinants of bilateral FDI flows," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 7, pages 1-53.
    4. Amal Krishnan & Padmaja Mundakkad, 2023. "Outward FDI and its impact on the parent firm: A case of Indian manufacturing firms," Economics Bulletin, AccessEcon, vol. 43(3), pages 1470-1484.
    5. United Nations ESCAP, 2012. "Foreign Direct Investment," STUDIES IN TRADE AND INVESTMENT, in: Asia-Pacific Trade and Investment Report 2012: Recent Trends and Developments, chapter 3, pages 47-67, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    6. Cozza, C. & Rabellotti, R. & Sanfilippo, M., 2015. "The impact of outward FDI on the performance of Chinese firms," China Economic Review, Elsevier, vol. 36(C), pages 42-57.
    7. Peter Nunnenkamp, 2010. "How Global is Foreign Direct Investment and What Can Policymakers Do About It? Stylized Facts, Knowledge Gaps, and Selected Policy Instruments," Chapters, in: Robert M. Solow & Jean-Philippe Touffut (ed.), The Shape of the Division of Labour, chapter 2, Edward Elgar Publishing.
    8. Valmor Comim Junior, 2021. "Literature review on Drivers of Chinese Outward Foreign Direct Investment," International Journal of Science and Business, IJSAB International, vol. 5(4), pages 143-157.
    9. Nunnenkamp, Peter & Sosa Andrés, Maximiliano & Vadlamannati, Krishna Chaitanya & Waldkirch, Andreas, 2012. "What drives India's outward FDI?," Kiel Working Papers 1800, Kiel Institute for the World Economy (IfW Kiel).
    10. Liu, Wen-Hsien & Tsai, Pan-Long & Tsay, Ching-Lung, 2015. "Domestic impacts of outward FDI in Taiwan: Evidence from panel data of manufacturing firms," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 469-484.
    11. Peter Nunnenkamp & Maximiliano Sosa Andrés & Krishna Chaitanya Vadlamannati & Andreas Waldkirch, 2012. "What Drives India’s Outward FDI?," South Asian Journal of Macroeconomics and Public Finance, , vol. 1(2), pages 245-279, December.
    12. Cozza, Claudio & Rabellotti, Roberta & Sanfilippo, Marco, 2014. "The impact of outward FDI on the performance of Chinese multinationals," BOFIT Discussion Papers 24/2014, Bank of Finland Institute for Emerging Economies (BOFIT).
    13. Staelens, Lotte & Louche, Céline & D’Haese, Marijke, 2014. "Understanding job satisfaction in a labor intensive sector: Empirical evidence from the Ethiopian cut flower industry," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182815, European Association of Agricultural Economists.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marc-Andreas Muendler & Sascha O. Becker, 2010. "Margins of Multinational Labor Substitution," American Economic Review, American Economic Association, vol. 100(5), pages 1999-2030, December.
    2. Rosario Crinò, 2009. "Offshoring, Multinationals And Labour Market: A Review Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(2), pages 197-249, April.
    3. Marcus Neureiter & Peter Nunnenkamp, 2010. "Outsourcing Motives, Location Choice and Labour Market Implications: An Empirical Analysis for European Countries," Kyklos, Wiley Blackwell, vol. 63(2), pages 206-230, May.
    4. Tsou, Meng-Wen & Liu, Jin-Tan & Hammitt, James K. & Chang, Ching-Fu, 2013. "The impact of foreign direct investment in China on employment adjustments in Taiwan: Evidence from matched employer–employee data," Japan and the World Economy, Elsevier, vol. 25, pages 68-79.
    5. repec:wsr:wpaper:y:2012:i:077 is not listed on IDEAS
    6. Giorgio Barba Navaretti & Davide Castellani & Anne-Celia Disdier, 2006. "How Does Investing in Cheap Labour Countries Affect Performance at Home? France and Italy," Development Working Papers 215, Centro Studi Luca d'Agliano, University of Milano.
    7. Cesare Imbriani & Rosanna Pittiglio & Filippo Reganati, 2011. "Outward Foreign Direct Investment and Domestic Performance: the Italian Manufacturing and Services Sectors," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 39(4), pages 369-381, December.
    8. René Belderbos & Kyoji Fukao & Keiko Ito & Wilko Letterie, 2013. "Global Fixed Capital Investment by Multinational Firms," Economica, London School of Economics and Political Science, vol. 80(318), pages 274-299, April.
    9. Helen Simpson, 2012. "How do Firms’ Outward FDI Strategies Relate to their Activity at Home? Empirical Evidence for the UK," The World Economy, Wiley Blackwell, vol. 35(3), pages 243-272, March.
    10. Yamashita, Nobuaki & Fukao, Kyoji, 2010. "Expansion abroad and jobs at home: Evidence from Japanese multinational enterprises," Japan and the World Economy, Elsevier, vol. 22(2), pages 88-97, March.
    11. Stefano Federico & Gaetano Alfredo Minerva, 2008. "Outward FDI and Local Employment Growth in Italy," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(2), pages 295-324, July.
    12. Driffield, Nigel & Pereira, Vijay & Temouri, Yama, 2019. "Does offshore outsourcing impact home employment? Evidence from service multinationals," Journal of Business Research, Elsevier, vol. 103(C), pages 448-459.
    13. Blanas, Sotiris, 2012. "Intra-firm trade and employment in US manufacturing," Kiel Advanced Studies Working Papers 458, Kiel Institute for the World Economy (IfW Kiel).
    14. Sethupathy, Guru, 2013. "Offshoring, wages, and employment: Theory and evidence," European Economic Review, Elsevier, vol. 62(C), pages 73-97.
    15. Engel, Dirk & Procher, Vivien, 2009. "Export, FDI and Productivity – Evidence for French Firms," Ruhr Economic Papers 111, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    16. Sascha O. Becker & Karolina Ekholm & Robert Jäckle & Marc-Andreas Muendler, 2005. "Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(4), pages 693-731, December.
    17. Cesare Imbriani & Rosanna Pittiglio & Filippo Reganati, 2014. "Affiliates and parent employment through foreign direct investment: a study case of substitutability or complementarity," International Economics and Economic Policy, Springer, vol. 11(4), pages 619-638, December.
    18. Özlem Onaran, 2012. "The Effect of Foreign Affiliate Employment on Wages, Employment, and the Wage Share in Austria," Review of Political Economy, Taylor & Francis Journals, vol. 24(2), pages 251-271, April.
    19. Vivien Procher & Dirk Engel, 2009. "Export, FDI and Productivity – Evidence for French Firms," Ruhr Economic Papers 0111, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    20. Lundan, Sarianna M., 2007. "The Home Country Effects of Internationalisation," Discussion Papers 1100, The Research Institute of the Finnish Economy.
    21. Schäffler, Johannes, 2016. "German Direct Investments in the Czech Republic – Employment Effects on German Multinational Enterprises," VfS Annual Conference 2016 (Augsburg): Demographic Change 145526, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    FDI location; type of FDI; domestic employment; home production; firm heterogeneity;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:ifwkwp:1546. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/iwkiede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.