Does Foreign Direct Investment Replace Home Country Investment? The Effect of European Integration on the Location of Swedish Investment

29 Pages Posted: 30 Aug 2007

See all articles by Pontus Braunerhjelm

Pontus Braunerhjelm

Royal Institute of Technology (KTH) - Department of Infrastructural and Urban Planning (INFRA); Örebro University - Swedish Entrepreneurship Forum

Lars Oxelheim

Research Institute of Industrial Economics (IFN); University of Agder; Knut Wicksell Center for Financial Studies, Lund University

Abstract

The purpose of this paper is to examine the effects of European integration on the location of investments by Swedish multinational corporations (MNCs). Evidence is presented about the extent to which European integration has attracted investment by Swedish MNCs, and whether foreign direct investment is being undertaken at the expense of home country investment. In the empirical analysis, involving both OLS and iterative SUR techniques, a significant difference across industries has been confirmed. A substitutionary relationship between foreign and home country investment is found for more R&D-intensive production, whereas the opposite pattern seems to prevail for production based on traditional comparative advantage. The results of this study emphasize the importance of using disaggregated industry-level data when analysing the effects of foreign direct investment on home country investment.

Keywords: Foreign Direct Investment, Home Country Investment, Regional Integration, Substitutionary, Schumpeterian

JEL Classification: F23, F12

Suggested Citation

Braunerhjelm, Pontus and Oxelheim, Lars, Does Foreign Direct Investment Replace Home Country Investment? The Effect of European Integration on the Location of Swedish Investment. Journal of Common Market Studies, Vol. 38, No. 2, 2000, Available at SSRN: https://ssrn.com/abstract=1010650

Pontus Braunerhjelm

Royal Institute of Technology (KTH) - Department of Infrastructural and Urban Planning (INFRA) ( email )

SE-100 44 Stockholm
Sweden
+46 8 790 9114 (Phone)
+46 8 411 7436 (Fax)

Örebro University - Swedish Entrepreneurship Forum ( email )

Södra Kungstornet
Kungsgatan 33, 7tr
Stockholm, 11156
Sweden

Lars Oxelheim (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
SE-10215 Stockholm
Sweden
+46 8 665 4527 (Phone)
+46 8 665 4599 (Fax)

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604
Norway

Knut Wicksell Center for Financial Studies, Lund University ( email )

P.O.Box 7080
S-220 07 Lund
Sweden
+46462228744 (Phone)

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