Chiara Franco

Why do firms invest abroad? An analysis of the motives underlying Foreign Direct Investments

Although FDI have been at the forefront of economic debate since a long time, economists have not yet developed a unified framework for their investigation. In this paper, we put forward the idea that an essential point to analyze FDI concerns their underpinning motives. Motives are at the core of FDI and FDI are only but one of different alternative means for firms to grasp an opportunity in a foreign country. We discuss the factors that shape the set of available alternatives and analyze those affecting the decision to engage in FDI (internalization determinants), along with those influencing their localization (local- ization determinants). Starting from Dunning (1993) we put forward a revised taxonomy of FDI motives consistent with this framework { resource seeking, market seeking and non-marketable asset seeking. In order to show its practical implications, we survey common empirical issues on FDI showing how our analysis can shed light on seemingly contradictory empirical results

Trade, foreign direct investments (FDI) and income inequality: Empirical evidence from transition countries

The aim of the article is to verify whether trade and inward foreign direct investments (FDI) may affect income distribution in a sample of 17 Transition Countries (TCs) over the period 1990–2006. In line with most of the previous literature, FDI do not have significant effects on income inequalities, whereas trade, especially when occurs with developed countries, seems to be more relevant. Different results are found when we take into consideration the educational system which represents an important channel through which FDI and trade may affect inequality.

Horizontal and vertical FDI: an analysis of technological determinants

The study analyses the role played by technological determinants, using the approach of National System of Innovation (NSI), in enhancing or hampering Foreign Direct Investments (FDI) with different motivations, namely horizontal and vertical FDI. The empirical analysis is carried out using data relative to the final destination of sales of US foreign subsidiaries in 42 host countries grouped according to income criteria. A two step empirical strategy is employed: first, we estimate a benchmark model finding that technological determinants mainly drive HFDI rather than VFDI. Secondly, applying a dynamic panel data approach we take into account that agglomeration economies may play a role as well more than other FDI determinants. Finally, through a sensitivity analysis we account for different ways of measuring HFDI and VFDI finding that measurement issue matters especially to establish which component of NSI results of greater relevance.

Outward Foreign Direct Investments Patterns of Italian Firms in the EU ETS

We consider the role played by the EU Emission Trading System (EU ETS) as a possible driver of outward Foreign Direct Investments (FDI henceforth). In particular, we aim at assessing whether EU ETS has any effect on outward FDI patterns of Italian firms. Using a novel panel dataset of about 59,000 firms covering the first two phases of the EU ETS and the pre-EU ETS period, we are able to observe the patterns of FDI by destination country of firms, distinguishing between those with plants covered by the EU ETS and other firms. Results show that, on average, firms in the EU ETS do not increase their presence in other countries. However, EU ETS firms operating in sectors particularly exposed to international competition increase their outward FDI towards countries not covered by the EU ETS.

FDIs Productivity Spillovers in Regional Clusters: A Comparison between Poland and Romania

In recent years Foreign Direct Investments (FDIs) inflows towards Eastern European countries have progressively increased, further stimulated by the entry of some countries into the European Union. However, the empirical literature finds mixed evidence for the actual occurrence of spillover effects from MNEs. We contribute to this discussion by investigating whether spillover effects occur more frequently in domestic firms located within regional clusters, taking into account the distinction between low-tech and high-tech sectors. Our findings show no evidence that location within regional clusters contributes to firms benefiting from FDIs spillovers. The findings for Romania show that, on the contrary, the productivity of firms located within regional clusters is influenced more negatively by the presence of MNEs than of firms located outside regional clusters. Furthermore, we find that FDIs have, in most cases, negative impact on firm-level productivity, in line with the previous findings of empirical studies on transition countries.

Horizontal and Vertical FDI: a comparative analysis of technological determinants

The study analyzes the role played by technological determinants, using the approach of National System of Innovation (NSI), in enhancing or hampering Foreign Direct Investments (FDI) with different motivations, namely horizontal and vertical FDI. The empirical analysis is carried out using data relative to the final destination of sales of US foreign subsidiaries in 42 host countries grouped according to income criteria. A three step empirical strategy is employed: first, we estimate a benchmark model finding that technological determinants exert a greater in influence in high income countries especially for vertical FDI. Secondly, applying a dynamic panel data approach we take into account that agglomeration economies may play a role as well as other FDI determinants. Finally, we are able to further disentangle the destination of sales according to whether they are directed towards other foreign affiliates or to unaffiliated persons recognizing that they are affected by different determinants.