Heterogeneous Investment Motives and Location Choice of Foreign Direct Investment in the United States

NYU Stern School Working Paper

32 Pages Posted: 16 Apr 2001

See all articles by Wilbur Chung

Wilbur Chung

University of Maryland - Robert H. Smith School of Business

Juan Alcacer

Harvard University - Strategy Unit

Date Written: September 2000

Abstract

Since firms conduct FDI for different reasons, we examine FDI location choice while accounting for both the locations' and the firms' traits using a random parameter logistic regression. Firm traits, as indirect indicators of likely motives, determine whether and how much a firm will value locations' traits. For FDI into the US during 1987-1993, we find that firms differentially value states' technical capabilities. Importantly, firms that have relatively low R&D intensity locate in states where more technical capabilities reside. This finding suggests that while some firms typically expand to use existing capabilities in new markets, many others do expand to seek technical capabilities resident abroad.

Keywords: FDI, location choice, firm heterogeneity, random parameter logit

JEL Classification: F23, R30, L21

Suggested Citation

Chung, Wilbur C. and Alcacer, Juan, Heterogeneous Investment Motives and Location Choice of Foreign Direct Investment in the United States (September 2000). NYU Stern School Working Paper, Available at SSRN: https://ssrn.com/abstract=265269 or http://dx.doi.org/10.2139/ssrn.265269

Wilbur C. Chung (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

HOME PAGE: http://www.rhsmith.umd.edu/faculty/wchung/

Juan Alcacer

Harvard University - Strategy Unit ( email )

Harvard Business School
Soldiers Field Road
Boston, MA 02163
United States
617 495-6338 (Phone)
617 495-0355 (Fax)

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