Information Technology and Bilateral FDI: Theory and Evidence

This paper investigates the impact of communication cost on the FDI activities of multinational corporations (MNCs). First, we provide a theoretical foundation for a gravity-type FDI model, which shows that physical distance and communication technology are important determinants of FDI activities. Second, we apply the IT-augmented gravity model to bilateral FDI data for a total of 47 OECD and non-OECD countries from 1980 to 1997 and find that distance is negatively related to inward FDI stocks while the growth of IT, measured by teledensity and celldensity, has encouraged FDI significantly. The impact is found to be more prominent on FDI from G7 countries to OECD countriesthan to non-OECD countries, and more prominent in the 1990s than in the 1980s. Moreover, IT plays a more effective role by reducing communication cost when distance is beyond a threshold range.communication cost, FDI, distance

A Framework to Update Hofstede’s Cultural Value Indices: Economic Dynamics and Institutional Stability”,

Abstract This study offers an update of the Hofstede cultural value dimensions. We argue that changes in economic conditions are the source of cultural dynamics, while the endurance of institutional characteristics provides the foundation for cultural stability. It is found that national wealth, measured by GDP per capita, has a curvilinear relationship with individualism, long-term orientation, and power distance scores. Relatively speaking, uncertainty avoidance and masculinity mainly reflect some rather stable institutional traditions, such as language, religion, climate, ethnic homogeneity, and legal origin, and are less likely to change over time

Information Technology and Bilateral FDI: Theory and Evidence

This paper investigates the impact of communication cost on the FDI activities of multinational corporations (MNCs). First, we provide a theoretical foundation for a gravity-type FDI model, which shows that physical distance and communication technology are important determinants of FDI activities. Second, we apply the IT-augmented gravity model to bilateral FDI data for a total of 47 OECD and non-OECD countries from 1980 to 1997 and find that distance is negatively related to inward FDI stocks while the growth of IT, measured by teledensity and celldensity, has encouraged FDI significantly. The impact is found to be more prominent on FDI from G7 countries to OECD countriesthan to non-OECD countries, and more prominent in the 1990s than in the 1980s. Moreover, IT plays a more effective role by reducing communication cost when distance is beyond a threshold range

Information Technology and Bilateral FDI: Theory and Evidence

This paper investigates the impact of communication cost on the FDI activities of multinational corporations (MNCs). First, we provide a theoretical foundation for a gravity-type FDI model, which shows that physical distance and communication technology are important determinants of FDI activities. Second, we apply the IT-augmented gravity model to bilateral FDI data for a total of 47 OECD and non-OECD countries from 1980 to 1997 and find that distance is negatively related to inward FDI stocks while the growth of IT, measured by teledensity and celldensity, has encouraged FDI significantly. The impact is found to be more prominent on FDI from G7 countries to OECD countriesthan to non-OECD countries, and more prominent in the 1990s than in the 1980s. Moreover, IT plays a more effective role by reducing communication cost when distance is beyond a threshold range

What Accounts for the Growth of Trade In Differentiated Goods: Economic Causes or Technological Imperatives?

This paper finds that income growth and technological factors are the major contributors to the growth of trade in differentiated goods. In contrast, tariff reduction seems to have little impact in the past two decades. (c) 2005 Elsevier B.V. All rights reserved

Essays on vertically integrated multinational enterprises: Theory and evidence

This dissertation investigates, theoretically and empirically, the incentives for vertical integration across borders and the emergence of vertically integrated multinational firms. Based on incomplete contract theory, chapter one develops a model of an endogenous ownership structure when two firms from two countries have a vertical production linkage. By aligning ownership with the right of control, the model shows how a vertically integrated multinational firm will emerge by comparing the costs and benefits of the integrated ownership structure with the non-integrated one. Using the data published by the Bureau of Economic Analysis, chapter two derives an index to measure the degree of vertical integration for U.S. multinational firms. By comparing the principal industry of U.S. parents and their majority-owned affiliates abroad, the study shows a significant degree of vertical integration for U.S. multinationals. Furthermore, the degree of vertical integration for U.S. firms in developed countries is as high as that in developing countries. Based on the theoretical model developed in chapter one and the vertical measures derived in chapter two, chapter three examines the correlates of two vertical intensities. One measures the proportion of vertical direct investment to horizontal investment; the other measures the extent of vertical direct investment to firms\u27 other international operations. It is found that parent-affiliate wage differential encourages more vertical direct investment when compared with horizontal direct investment. However, the wage differential is negatively rather than positively correlated with the second vertical intensity. In sum, the measurable theory indicators tend to correspond better to incomplete contract theory than to factor proportions theory. Chapter four is used as a case study for the non-contractible approach to vertical integration. Based on the current accounting rate system that governs international calls in the telecommunications industry, it is shown that an integrated ownership structure is preferred when one of the two markets is very elastic in demand or is much smaller in market size. On the other hand, a non-equity relationship will dominate when both markets are inelastic and similar in market size