New Avenues for Empirical Analysis of Cross-Border Investments: An Application for the ASEAN Members and Middle and Low Income Country Outward Investments
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Date
2013-10-18
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Johns Hopkins University
Abstract
This thesis presents a new innovative data collection methodology and analysis of cross-border foreign direct investment (FDI) from middle and low income countries. Special emphasis is given to FDI in the ASEAN region.
Responding to the dearth of available detailed FDI data for non-OECD countries from traditional macroeconomic sources in the official sector, this thesis presents a new detailed microeconomic transactional dataset for the analysis of cross-border investments based on individual greenfield investments and mergers and acquisitions (M&A). The transactional dataset constructed is considerably more detailed in country-, sector-, and mode of investment than existing alternative FDI data sources. This enables far more detailed descriptive analysis of FDI trends to be carried out for middle and low income countries, and the ASEAN membership in particular.
This thesis presents a new and more detailed version of the directional 4-type FDI typology from Ramamurthy and Singh (2009), and empirical findings concerning the directions, sectors and modes of investment of outward FDI from middle and low income countries. When measured in dollars invested and number of transactions, up to around half of outward FDI from middle and low income countries is found to flow upwards into economies generally more – and often much more – advanced than the country of origin. New descriptive empirical results show that outward FDI from middle and low income countries tend not to follow factor endowment driven investment hypotheses, or predictions of investments in countries of similar economic development (except among the lowest income country investors). Instead, the descriptive results suggest that middle and low income country outward investors are predominantly driven by firm-level incentives to try to obtain new technologies, market access or economies of scale. The results indicate that middle and low income country outward investors should consequently predominantly be analyzed like other multinationals from advanced economies.
Probabilistic probit/tobit regression analysis of a partial dataset verifies that the most powerful investment motivations among middle and low income country investors are to try to enter far more advanced economies early in origin country development, and to seek to take control over assets in advanced economies through M&A.
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International investments, FDI, multinational firms, globalization, firm organization and market structure, ASEAN, developing economy outward investors