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Firm strategies: some empirical studies

Firm strategies: some empirical studies. Majority-owned or joint venture? New venture or acquisition? R&D in affiliates? Intra-firm trade? Market orientation? Technology imports?. Common elements. Empirical studies based on detailed data on company operations

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Firm strategies: some empirical studies

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  1. Firm strategies: some empirical studies Majority-owned or joint venture? New venture or acquisition? R&D 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 [ R&D (+), AGE (+), DIV (-), SIZE (+), GDP (-), GNPC (?) ] • Results: AGE, DIV, GDP OK. R&D 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. R&D in affiliates? • Theory: some adaptive R&D by mature MNCs in well developed markets likely • Hypothesis: R&D = f [ firm and host country characteristics ] • Results: Export-oriented affiliates of high-tech firms in large, rich host countries do R&D

  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 don’t 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

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