Skip to main content
SpringerLink
Log in

Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects

  • Published:
Review of World Economics Aims and scope Submit manuscript

Abstract

This paper uses a proportional hazard model to study foreign direct investment by Japanese manufacturers in Europe between 1970 and 1994. We divide each firm’s investment total into a sequence of individual investment decisions and analyze how firm-specific characteristics affect each decision. We find that total factor productivity is a significant determinant of a firm’s initial and subsequent investments. Parent-firm size does not have a significant influence on the initial decision to invest. Large firms simply have more investments than smaller firms. Other firm-specific characteristics, such as the R&D intensity, export share and keiretsu membership, also play a role in the investment process.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  1. Baldwin, R. E., and G. I. P. Ottaviano (2001). Multiproduct Multinationals and Reciprocal FDI Dumping. Journal of International Economics 54 (2): 429–448.

    Google Scholar 

  2. Belderbos, R., and L. Sleuwaegen (1996). Japanese Firms and the Decision to Invest Abroad: Business Groups and Regional Core Networks. Review of Economics and Statistics 78 (2): 214–220.

    Google Scholar 

  3. Blomström, M., and R. Lipsey (1991). Firm Size and Foreign Operations of Multinationals. Scandinavian Journal of Economics 93 (1): 101–107.

    Google Scholar 

  4. Blonigen, B., C. Ellis, and D. Fausten (2005). Industrial Groupings and Foreign Direct Investment. Journal of International Economics 65 (1): 75–91.

    Google Scholar 

  5. Breslow, N. (1974). Covariance Analysis of Censored Survival Data. Biometrics 30 (1): 89–100.

    Google Scholar 

  6. Cameron, A. C., and P. Trivedi (1998). Regression Analysis of Count Data. Cambridge: Cambridge University Press.

  7. Chang, S. J., and P. Rosenzweig (2001). The Choice of Entry Mode in Sequential Foreign Direct Investment. Strategic Management Journal 22 (8): 747–776.

    Google Scholar 

  8. Cox, D. (1972). Regression Models and Life Tables. Journal of the Royal Statistical Society 34 (2): 187–220.

    Google Scholar 

  9. Drake, T., and R. Caves (1992). Changing Determinants of Japanese Foreign Investment in the United States. Journal of the Japanese and International Economies 6 (3): 228–246.

    Google Scholar 

  10. Girma, S., H. Görg, and E. Strobl (2004). Exports, International Investment, and Plant Performance: Evidence from a Non-Parametric Test. Economic Letters 83 (3): 317–324.

    Google Scholar 

  11. Greenaway, D., and R. Kneller (2007). Firm Heterogeneity, Exporting and Foreign Direct Investment. Economic Journal 117 (517): F134–F161.

    Google Scholar 

  12. Head, K., and J. Ries (2003). Heterogeneity and the FDI versus Export Decision of Japanese Manufacturers. Journal of the Japanese and International Economies 17 (4): 448–467.

    Google Scholar 

  13. Head, K., J. Ries, and D. Swenson (1999). Attracting Foreign Manufacturing: Investment Promotion and Agglomeration. Regional Science and Urban Economics 29 (2): 197–218.

  14. Heckman, J., and B. Singer (1984). Econometric Duration Analysis. Journal of Econometrics 24 (1–2): 63–132.

  15. Helpman, E., M. Melitz, and S. Yeaple (2004). Export versus FDI. American Economic Review 94 (1): 300–317.

    Google Scholar 

  16. Horst, T. (1972). Firm and Industry Determinants of the Decision to Invest Abroad: An Empirical Study. Review of Economics and Statistics 54 (3): 256–266.

    Google Scholar 

  17. Horstmann, I., and J. Markusen (1987). Strategic Investments and the Development of Multinationals. International Economic Review 28 (1): 109–121.

    Google Scholar 

  18. Hymer, S. (1960). The International Operations of National Firms: A Study of Direct Foreign Investment. Cambridge, Mass.: MIT Press.

  19. Kiefer, N. (1988). Economic Duration Data and Hazard Functions. Journal of Economic Literature 26 (2): 646–679.

    Google Scholar 

  20. Levinsohn, J., and A. Petrin (2003). Estimating Production Functions Using Inputs to Control for Unobservables. Review of Economic Studies 70 (2): 317–341.

    Google Scholar 

  21. Markusen, J. (2002). Multinational Firms and the Theory of International Trade. Cambridge, Mass.: MIT Press.

  22. Mason, M. (1994). Historical Perspectives on Japanese Direct Investment in Europe. In M. Mason and D. Encarnation (eds.), Does Ownership Matter? Japanese Multinationals in Europe. Oxford: Clarendon Press.

  23. Padmanabhan, P., and K. R. Cho (1996). Ownership Strategy for a Foreign Firm: An Empirical Investigation of Japanese Firms. Management International Review 36 (1): 45–65.

    Google Scholar 

  24. Raff, H., M. Ryan, and F. Stähler (2007). Firm Productivity and the Foreign-Market Entry Decision. Mimeo. University of Kiel.

  25. Rob, R., and N. Vettas (2003). Foreign Direct Investment and Exports with Growing Demand. Review of Economic Studies 70 (3): 629–648.

    Google Scholar 

  26. Ross, S. (1996). Stochastic Processes. New York: John Wiley.

  27. Swedenborg, B. (1979). The Multinational Operations of Swedish Firms: An Analysis of Determinants and Effects. Stockholm: IUI.

  28. Trevino, L., and J. Daniels (1994). An Empirical Assessment of the Preconditions of Japanese Manufacturing Foreign Direct Investment in the United States. Weltwirtschaftliches Archiv/Review of World Economics 130 (3): 576–599.

    Google Scholar 

  29. UNCTAD (United Nations Conference on Trade and Development) (2004). World Investment Report 2004. New York: United Nations.

Download references

Author information

Authors and Affiliations

  1. Department of Economics, Christian-Albrechts-University of Kiel, Wilhelm-Seelig-Platz 1, 24098, Kiel, Germany

    Horst Raff

  2. Western Michigan University, Kalamazoo, MI, USA

    Michael J. Ryan

Authors
  1. Horst Raff
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Michael J. Ryan
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Horst Raff.

Additional information

JEL no.

F23, L20

About this article

Cite this article

Raff, H., Ryan, M. Firm-Specific Characteristics and the Timing of Foreign Direct Investment Projects. Rev. World Econ. 144, 1–31 (2008). https://doi.org/10.1007/s10290-008-0135-2

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10290-008-0135-2

Keywords

Search

Navigation