Determinants of Capital Intensive and R&D Intensive Foreign Direct Investment

26 Pages Posted: 18 May 2007

See all articles by Martín Gonzalez-Eiras

Martín Gonzalez-Eiras

University of Copenhagen

Mauricio Prado

Copenhagen Business School

Date Written: May 15, 2007

Abstract

We study the determinants of capital intensity and technology content of foreign direct investment, an important economic driving force for developing countries. For this purpose, we use sectoral industry data on U.S. foreign investment abroad, and data on host countries' institutional characteristics, like investment climate, protection of property rights, labor standards and constitutional arrangements. Our regressions show that better protection of property rights has a significant positive effect on R&D but not on capital intensive capital flows. There is evidence that an increase in workers' bargaining power results in a reduction of capital and technologically intensive foreign investment. And although the evidence with respect to constitutional arrangements is not very strong, presidential regimes appear to be less able than parliamentary ones to deliver policies attracting R&D intensive capital flows. This is consistent with recent research on the effects of constitutional arrangements on economic growth.

Keywords: foreign direct investments, capital intensity, research and development, development policy, property rights, labor institutions, constitutions

JEL Classification: C24, F21, F23, O34

Suggested Citation

Gonzalez-Eiras, Martín and Prado, Mauricio, Determinants of Capital Intensive and R&D Intensive Foreign Direct Investment (May 15, 2007). Available at SSRN: https://ssrn.com/abstract=986561 or http://dx.doi.org/10.2139/ssrn.986561

Martín Gonzalez-Eiras (Contact Author)

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

Mauricio Prado

Copenhagen Business School ( email )

Porcelaenshaven 16A
1.91
Frederiksberg, DK - 2000
Denmark
38155635 (Phone)
38152576 (Fax)

HOME PAGE: http://sf.cbs.dk/prado

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