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School Research Seminar - The Location Choice of US FDI: How do Institutions Matter?

4 November 2015 - 28 November 2015

1:00 - 2:00pmFB 4.04/4.08 (Lunch from 12:30pm in the kitchen)

(40 minute talk and 20 minute Q&A)

Speaker name & affiliation

Kunal Sen, Global Development Institute, University of Manchester

Seminar title

The Location Choice of US FDI: How do Institutions Matter?

Abstract

We examine the joint impact of contract enforcement institutions and industry specific relationship specificity of investments on the location choice of US outward foreign direct investment (FDI).  We hypothesize that countries with better property rights institutions receive relatively more US FDI in industries for which relationship-specific investments are important. We first show that US FDI flows differ significantly both across countries over time, but also within the same country across sectors. Next, using a three dimensional panel data set of 50 countries and six sectors for the period 1984-2010, we find support for our hypothesis.

The United States is one of the largest sources of foreign direct investment globally. The talk will be of interest to international business and economics scholars as it contributes to the literature on transnational corporations by showing that contract enforcement institutions matter, both at the national level and sectorally, in explaining both across and within country variation in US outward FDI flows. This suggests that the improvement of institutional quality should be one of the key priorities for policy makers, who not only want to attract US FDI, but also in sectors that are the most dynamic and have the highest institutional complexity.

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