Intermediary Products: FDI Strategies, Imports, Exports, and Trade Balances in Developed Economies

Abstract

Has the relationship between the dominant investment motives of multinational enterprises (MNEs) and national trade balances, imports, and exports changed over time? A 1996 study hypothesized and found that the MNE market versus resource seeking investment motives in developed countries (DCs) resulted in different aggregate impacts on national trade balances, imports, and exports. In this study, we ask whether the increased use of intermediary products, a major change in the way MNEs conduct business, affect the previously found patterns. Because firm‐level data on intermediary products is not widely available across countries, we indirectly test their impact, hypothesizing that the rise in use of intermediary products has changed MNE investment motives in DCs, resulting in stronger relationships between foreign direct investment (FDI) and imports/exports in high‐FDI DCs but weaker links between FDI and national trade balances. Implications and future research directions are discussed. © 2015 Wiley Periodicals, Inc.

Determinants of Inward FDI in Mongolia: An Application of the ARDL Bounds Testing Approach to Cointegration

“…Although the results are contrary to what we initially expected, it is in coherence with the behavior of Chinese FDI -which constitutes a major portion of FDI inflows to Mongolia -as reported by Buckley et al (2007) who iterated that Chinese FDI tend to be defensive, tariff-jumping, and therefore follows imports from China. Moreover, it supports the findings of Napshin and Brouthers (2015) who found FDI inflows to be associated with trade deficits.…”