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Abstract:
This paper reviews the empirical literature on technology spillovers from foreign direct investment (FDI) in developing countries. The sample includes 32 studies that model the contribution of FDI presence to local productivity in the host country through spillover effects such as those associated with technology transfer and superior managerial know-how. In our quantitative meta-analysis, study estimates of spillover effects are regressed on a number of study characteristics in order to determine what aspects of study design and data characteristics explain the magnitude, significance, and direction of spillovers from FDI. The meta-regression results suggest that spillover effects are more pronounced when studies measure the effect of FDI spillovers on output, and are more likely to be significant and positive for Asian countries. Results also highlight the possibility that the documented spillover effects from FDI in developing countries may be partly a product of model misspecification.

Foreign Direct Investment, Spillovers, Productivity, Developing Countries

Abstract:
Since the formation of the World Trade Organization, the proliferation of regional trade agreements has raised concerns regarding the prospects of multilateral trade liberalization. The objective of this paper is to assess whether trade among member countries (intra-regional trade) contributes more to output growth than trade with nonmember countries (extra-regional trade) using 13 European Union states. The empirical framework first estimates a series of Granger causality tests for the trade-growth relationship for EU countries in our sample. Next, the marginal effects of intra-regional and extra-regional trade on economic growth in the EU are estimated using a standard growth model with trade intensities as our focus variables. In addition to the basic influences of investment and population growth, the results confirm the importance of trade openness for growth. More importantly, they show that intra-regional trade has had a lesser impact on growth in output per capita than extra-regional trade by almost 30% over the period 1980-2003.

Regional Integration, Trade Patterns, Economic Growth of Open Economies

Abstract:
Studies in international business (IB) have considered both theoretical and empirical analyses of investment strategies by multinational firms in transition economies. However, there is scant research on the impact of firm-specific factors on the likelihood, timing, and mode of entry decisions in these economies. We provide evidence on three aspects of the strategic decisions by U.S. firms to invest in transition economies. First, we find that firms entering the region have greater advertising intensity and sales growth relative to industry peers that did not enter the region, suggesting that market-seeking considerations motivate expansion. Second, we find that earlier entry is undertaken by firms with fewer industry competitors and higher sales growth, suggesting that the desire to secure market share ahead of competitors motivate entry timing. Finally, we investigate the choice of entry mode into the region and find that firms from concentrated industries are more likely to enter the region with high equity commitment, consistent with market-seeking motives. We also find that firms incorporate the degree of progress with market-oriented reforms in making decisions concerning entry timing and mode.

Foreign Direct Investment, Transition Economies

Abstract:
This article investigates the impact of foreign competition from China on employment and wages in four U.S.-Mexico Border counties: Santa Cruz, Arizona; San Diego, California; El Paso, Texas; and Webb, Texas. Using disaggregated industry-level data between 1992 and 2006, we find that increased trade with China is associated with significantly lower county-industry employment and wages. In contrast, and as expected, increased imports from Mexico are positively related to increased employment and wages in U.S.-Mexico border counties. The results indicate that the U.S.-Mexico supply-chain relationship related to the maquiladora industry is significantly affected by Chinese competition. Implications for policy include an increased focus on federal programs that are intended to diversify the border economy.

Abstract:
This paper investigates the impact of foreign competition from China on employment and wages in four U.S.-Mexico border counties: Santa Cruz, AZ, San Diego, CA, El Paso, TX, and Webb, TX. Using disaggregated industry-level data between 1992 and 2006, we find that increased trade with China is associated with significantly lower county-industry employment and wages. In contrast, and as expected, increased imports from Mexico are positively related to increased employment and wages in U.S. Mexico border counties. The results indicate that the U.S.-Mexico supply-chain relationship related to the maquiladora industry is significantly affected by Chinese competition. Implications for policy include an increased focus on federal programs that are intended to diversify the border economy.

Employment, Trade Patterns, China, Export Competition

Abstract:
Since the fall of the Berlin wall in 1989, the success of the former Soviet Bloc countries to attract foreign direct investment (FDI) has been mixed. The objective of this paper is to capture the strategic interdependence between investment decisions by foreign firms and reform decisions by host governments in an evolutionary game-theoretic framework. The static game has two equilibria. In one, a government is committed to rapid reform through implementation of market-oriented policies. Here FDI through acquisitions actively contributes to economic restructuring. In the second equilibrium, the government adopts a more gradual approach to reform. Here firms seek to minimize exposure to operational uncertainties by choosing new plant investments and FDI results in only an indirect transfer of technical and managerial know-how. In a dynamic setting, the two equilibria take on the interpretation of conventions about how to invest in countries that are at different stages of transition. Evidence drawn from acquisitions and new-plant investments in transition economies is also provided in relation to the model's equilibria.

Evolutionary Game Theory, Foreign Direct Investment, Transition Economies

Abstract:
In light of the political debate on offshore outsourcing, this paper examines firm financial characteristics associated the probability of being identified as an outsourcer. In a sample of S&P 500 firms, we find that firms identified as outsourcers operate in more competitive industries, have relatively worse operating performance, higher administrative overhead, and higher labor overhead. These firm characteristics are consistent with cost-cutting objectives and the need to respond to competitive pressures. We also find that outsourcing firms have a higher rate of growth in operating performance from 2003-2006. From a policy perspective, our results suggest that the political pressure to limit firms' ability to offshore outsource will likely reduce their flexibility to respond to operating and competitive challenges.

Outsourcing, Offshoring

Abstract:
This study uses a unique sample to evaluate changes in shareholder wealth from announcements of expansion by U.S. firms into eighteen transition economies, through four entry modes, from 1987 through 1999. Results show that value creation is most significantly associated with expansion through less risky entry modes into host countries that are in the more advanced stages of market liberalization and structural reform. In addition, wealth effects are related to firm characteristics and timing of expansion with significant value creation documented for firms entering transition economies in 1989 and 1990.

Foreign direct investment, transition economies, event study

Abstract:
Without an income tax, Washington State relies heavily upon its sales tax revenue to fund public goods and services. Bordering Idaho and especially Oregon, where the sales tax is substantially lower, the juxtaposition of the different tax structures generates the border tax effect in Washington's border counties. Controlling for unobservable county-specific characteristics and spatial autocorrelation, we find that the price elasticity generated by the sales tax discrepancy over the years 1992 - 2006 is -3.11. We estimate that elimination of the sales tax differential between Washington and its neighboring states would generate tax revenue in excess of $145 million at the state level and over $21 million at the county level in border counties.

State Taxation, Consumer Economics, Panel Data

Abstract:
This paper uses a complex network approach for the analysis of bilateral trade data between countries over the period 1970-2000. We compute the network community structure for every year between 1970 and 2000 and compare it to null community structures that emerge from various models based on regional and geographic classifications, the implementation of RTA's and/or on gravity models of trade. Our results show that RTA formation appears to have a cyclical pattern on the world trade network community structure. We document periods where bilateral trade flows and the structure of the world trade network are consistent with those predicted by formation of RTAs. These cycles occur in 1980-86 and 1990-96. Conversely, we also find periods in which the pattern in the world trade network is not explained by RTA formation. Two periods, 1986-1990 and 1997-2000, show a pattern of bilateral trade flows that moves away from the prediction that results from assuming RTA-formation as the driving force in the determination of the world trade network structure. Factors contributing to the latter parts of the cycle we document may be due to the growing role of foreign investment and decreased trade costs over the sample period.

International Trade Flows, Regional Trade Agreements, Complex Networks

Abstract:
This article uses daily data on stock returns of five U.S. publicly traded cigarette producers to document the wealth effects of antismoking policies initiated in the period 1964 to 1971. The authors find significant abnormal returns across 23 dates corresponding to important regulatory events. The second-stage estimation shows that wealth effects are also influenced by firm characteristics, such as market share, advertising intensity, percentage of sales of filter-tip cigarettes, percentage of advertising expenditures devoted to TV and radio, and tobacco leaf inventories. Overall, the article estimates that industry losses from antismoking policies amounted to approximately $1.5 billion.

Abstract:
Anecdotal evidence suggests that new CEOs with foreign backgrounds direct their firms to become more international in their operations. We examine this hypothesis formally using data on U.S. S&P-500 manufacturing firms from 1992 through 1997 and biographical information on CEOs' birth and education locations that allow us to identify changes from U.S.- to foreign-connected CEOs. Robust to a variety of specifications, we find that a U.S. firm's switch from a U.S. to a foreign CEO leads to substantial increases in the firm's proportion of its foreign assets and foreign affiliate sales. In fact, our preferred specification indicates that foreign asset and affiliate sales proportions increase 30 and 50%, respectively, for the five years after there is CEO turnover to one with a foreign background. This is in contrast to U.S.-to-U.S. CEO switches in our sample that show no evidence of changes in a firms' foreign market participation. These large effects contrast with previous literature that finds little evidence for changes in firm performance with CEO turnover.

Abstract:
The strategic interdependence between market reforms and foreign direct investment (FDI) in transition economies in the 1990s is presented in an evolutionary game-theoretic framework. The static game has two equilibria: in one, FDI contributes to economic restructuring through acquisitions in host countries with rapid market reforms; in the other, slow reform motivates firms to minimize exposure to operational uncertainties through new plant investments. Here FDI plays only a mediating role in economic reform. In a dynamic setting, these equilibria serve to establish conventions about how to invest in countries at different stages of transition. Empirical evidence drawn from U.S. FDI in transition economies further illustrates the model’s equilibria.

evolutionary game theory, foreign direct investment, transition economies