Rosa Forte

The Effects Of Foreign Direct Investment On The Host Country'S Economic Growth: Theory And Empirical Evidence

Foreign direct investment (FDI) influences host countrys economic growth through several channels. Empirically, a variety of studies considers that FDI generate economic growth but others conclude that FDI is a source of negative effects. By reviewing existing theoretical and empirical literature, we intend to shed light on the main explanations for the mixed results. The main conclusion is that the effects of FDI on economic growth depend on the domestic conditions of the host country (e.g., human capital, economic and technological conditions, degree of openness of its economy). Thus, the host countries governments have a key role in creating the conditions that allow for the leverage of the positive effects or for the reduction of the negative effects of FDI on the host countrys economic growth.

Internationalisation through franchising: the Parfois case study

Purpose – Both franchising and internationalisation are important subjects of study, but in the existent literature little attention has been given to these two topics combined. The purpose of this paper is to analyse the internationalisation through franchising, using as a case study the internationalisation process of Parfois, a specialised retail brand based in northern Portugal, and operating in the fashion accessories business.Design/methodology/approach – A case study approach was adopted based on information collected from various sources, including the companys website, the World Bank database, some news reports about Parfois, and also from interviews with those responsible for the internationalisation of Parfois.Findings – The authors have identified a clear pattern in the internationalisation process: the firm is willing to open its own stores in the European market, where it feels comfortable, allowing franchisees to assume the investment risk in other world regions, with particular relevance ...

The impact of industry characteristics on firms’ export intensity

Several authors have studied the factors that influence a firm’s export performance, but few have addressed the relationship between industry characteristics and export intensity. The objective of the present study was to analyze the impact of industry characteristics on a firm’s export intensity, the latter a measure commonly used to assess export performance, seeking to add empirical evidence to this relatively neglected research area. Based on a sample of 19,504 Portuguese manufacturing firms, 7,930 of which were exporting, during the period 2010–2013, and using panel data estimation, the empirical results show that some industry characteristics (labor productivity, export orientation, concentration), as well as characteristics of the firm (labor productivity, size and age of the firm) are important determinants of a firm’s export intensity. It is concluded in particular that a firm’s export intensity is positively affected by the export orientation of the industry, as well as by the firm’s labor productivity, confirming the belief that firms and governments need to direct their policies towards increased productivity in order to improve competitiveness in foreign markets. It is argued that, in order to enhance the positive effects of these policies, the policies should be directed towards industries with the highest export focus.

Multinational firms and host country market structure: A review of empirical literature

We address the impact of multinationals on host country market structure through reviewing existing empirical literature. Our main conclusion is that the majority of studies focus on samples of manufacturing industries/firms, neglecting the service sector, despite its importance. Future research should be directed to this sector and explore the possibility of bidirectional causality between foreign presence and host country industry concentration. Studies concerning the impact of multinationals on entry, exit and survival of host country firms must use more recent data, investigate the role of vertical linkages and taking into account other control variables that may affect the exit rate. Finally, future work should take into account the mode of foreign firm establishment in the host country.

A Moral Hazard Model of a Multinational Firm’s Decision between Foreign Direct Investment and International Subcontracting

This paper develops a moral hazard model applied to a multinational firm’s decision between foreign direct investment and international subcontracting. We compare the results of the moral hazard model, characterised by the fact that the multinational firm cannot control the operations performed by the subcontractor firm, with the traditional model of symmetric information. We conclude that the uncertainty associated with the subcontractor firm’s behaviour, despite increasing the multinational firm’s preference to engage in foreign direct investment, does not change its optimal decision, which is to subcontract. The exception occurs when the subsidiary stands as more efficient than the subcontractor firm.

A CLUSTER ANALYSIS OF FDI IN LATIN AMERICA

This study contributes to the literature on FDI in Latin America using cluster analysis, a technique rarely employed in studies on this topic, to examine the FDI performance of Latin American countries. The empirical findings reveal three clusters in 2011, compared to just two in 2005. The cluster with better FDI performance (Chile, Panama, Uruguay, and Costa Rica) also performs better in terms of variables such as market size, trade openness, and human capital. Between 2005 and 2011 Argentina left the best-performing cluster and the cluster with poorer performance split into two, indicating heterogeneous evolution of economies in the region.

Outward FDI and Home Country Exports: Theoretical Approaches and Empirical Evidence

ABSTRACT This article reviews the growing body of literature that empirically analyzes the impact of outward FDI on home country exports. Focusing the analysis on the various types of studies and identifying the methods used and the countries analyzed, this study allows us to identify gaps in the literature and make suggestions for future research. Future research efforts should focus on more disaggregated data, particularly at the firm and product levels, and adopt a multilateral approach, which is essential for a complete analysis of the relationship between FDI and exports.

Location Determinants of Portuguese FDI in Poland

Abstract In recent years, Poland has become one of the most attractive locations for foreign investment and has strengthened its position in Central and Eastern Europe (CEE) and throughout Europe. The aim of this paper is to analyse what makes Poland an attractive market for foreign investors, to offer a better understanding of reasons why Poland is a more attractive location compared to its neighbours in the CEE. After surveying Portuguese investors in Poland, our results indicate that the most significant factor determining locating a business in Poland is its large domestic market. Poland’s location is also appreciated by Portuguese investors while deciding on FDI. As indicated by Portuguese investors, the most important obstacles to investment in Poland are language barriers, cultural differences and bureaucracy. These results are relevant for companies who wish to invest in Poland and can also assist policymakers in designing policies to attract FDI.

Financial Constraints and Small and Medium-Sized Firms’ Export Propensity: Evidence from Portuguese Manufacturing Firms

Abstract The internationalization of firms through exports is often crucial to their survival and growth in this era of globalization. This is particularly the case for small and medium-sized enterprises (SMEs) operating in small and saturated markets, as is the case in Portugal. However, firms face several barriers to exporting, and this study aims to verify whether financial constraints influence a firm’s export propensity. The empirical analysis is based on a sample of 12,732 Portuguese manufacturing SMEs during the period 2008–2012, and tests two different proxies of financial constraints: the liquidity and leverage ratios. The results indicate that the SMEs in less healthy financial positions are less likely to export than the others are, although the impact of financial constraints on these Portuguese firms appears to be relatively small.

A Signalling Model of Firms' Foreign Direct Investment Relocation Decision

Abstract We analyse whether the foreign government can influence the multinational firms relocation decision, through signalling the amount of subsidy it can grant. The foreign country is one of two possible types which differ on their investment conditions. Comparing the results obtained with an adverse selection model (the government knows the country type but the firm does not) with the results of a signalling model, we conclude that relocation is more likely, and the necessary subsidy is smaller, in the signalling model than with adverse selection. This can explain the proliferation of Investment Support Agencies worldwide.