Firm strategies: some empirical studies

1
Firm strategies some empirical studies

• Majority-owned or joint venture?
• New venture or acquisition?
• RD in affiliates?
• Intra-firm trade?
• Market orientation?
• Technology imports?

2
Common elements

• Empirical studies based on detailed data on
  company operations
• US and Sweden among the few countries that
  collect detailed information on what their
  companies do abroad
• Simple econometrics and statistics
• Blomström, Kokko, Zejan (2000), Foreign Direct
  Investment Firm and Host Country Strategies,
  Macmillan.

3
Majority-owned or joint venture?

• Theory firm and host country characteristics
  important
• Hypothesis
• MOFA f RD (), AGE (), DIV (-), SIZE
  (), GDP (-), GNPC (?)
• Results AGE, DIV, GDP OK.
• RD not significant. SIZE negative. Why?
• GNPC positive for developing countries easier
  to handle richer markets?

4
New venture or acquisition?

• Theory choice depends on firm strategy and host
  country characteristics
• Hypothesis
• ACQ f AGE (-), DIV (), GROWTH (-), GNPC
  (), GDP (?), TIME ()
• Results DIV, GROWTH, GNPC, TIME OK
• AGE and GDP not significant

5
RD in affiliates?

• Theory some adaptive RD by mature MNCs in well
  developed markets likely
• Hypothesis
• RD f firm and host country
  characteristics
• Results
• Export-oriented affiliates of high-tech firms in
  large, rich host countries do RD

6
Intra-firm trade?

• Theory and hypothesis diversified products and
  integrated affiliates require much intra-firm
  trade
• Results High-tech firms and greenfield
  affiliates have more intra-firm trade.
• Capital controls in foreign countries are
  important.

7
Trade orientation of affiliates?

• Setting Latin America after debt crisis. Will
  MNCs be able to switch to exports when local
  markets contract?
• Results US MNCs faster than local firms in
  redirecting their production to export markets.
• Policy relevance can locals learn from foreign
  affiliates?

8
Technology imports?

• Theory costs and benefits determine affiliates
  technology imports
• Hypothesis
• TECH f EDU (), COMP (), REG (?)
• Results
• EDU and COMP confirmed positive. Regulations
  have little impact. Why?
• Policy conclusions?

9
SUMMARY

• MNCs dont always behave the same way. Industry,
  host, and home characteristics determine behavior
• Effects of FDI on home and host countries will
  vary depending on behavior
• Policies focusing on the environment are
  alternatives to direct regulation of MNCs