Mnes and Industrial Structure in Host Countries: A Mean Variance Analysis of Ireland's Manufacturing Sector
Journal of International Business Studies, Vol. 37, No. 3, pp. 392-406, 2006
37 Pages Posted: 3 Jun 2005 Last revised: 5 Jan 2011
Date Written: June 1, 2004
We use mean-variance analysis to demonstrate the importance of a hitherto neglected benefit of enticing MNEs to locate in small and medium-sized countries. During the 25 years from 1974 to 1999, over 1000 foreign MNEs have located in Ireland, and they have raised their share of all manufacturing jobs in the country from one-third to one-half. The foreign MNEs tend to operate in high-technology sectors, and they grow faster with greater volatility than the traditional low-technology indigenous firms. Because they are imperfectly correlated with the indigenous sectors, however, the foreign MNEs have helped to create a more completely diversified manufacturing sector in the host country that can grow faster without a commensurate rise in volatility and risk.
Keywords: FDI, MNEs, industrial structure, Ireland
Suggested Citation: Suggested Citation