Are Foreign Investments Replacing Domestic Investments? - Evidence from Finnish Manufacturing

Olli-Pekka Oksanen

No 1001, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: This study analyses the relationship between firms foreign and domestic investments using a panel dataset containing 218 Finnish manufacturing firms during the years 1998-2002. The study examines whether foreign investments increase or decrease domestic investments and whether the effect varies between investments directed to developed markets or emerging markets. Financial constraints effect on the relationship is also investigated. The empirical part estimates an empirical investment equation following Bond and Meghir (1994). The estimations are carried out using the GMM (Generalised Method of Moments) instrumental variables method, which allows for endogenoity in the explanatory variables. The main result of the study is that foreign investments effect on domestic investments varies depending on the direction of the investments and the firms financial position. Foreign investments conducted by financially unconstrained firms increase domestic investments substantially where as emerging market investments of financially constrained firms decrease domestic investments moderately.

Keywords: foreign direct investment; domestic investment; multinational enterprises; financial constraint (search for similar items in EconPapers)
Pages: 59 pages
Date: 2006
New Economics Papers: this item is included in nep-fmk
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.etla.fi/wp-content/uploads/2012/09/dp1001.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rif:dpaper:1001

Ordering information: This working paper can be ordered from
https://www.etla.fi/en/publications/dp1001-en/

The price is 10€.

Access Statistics for this paper

More papers in Discussion Papers from The Research Institute of the Finnish Economy Contact information at EDIRC.
Bibliographic data for series maintained by Kaija Hyvönen-Rajecki ().