Working Paper: CEPR ID: DP4601
Authors: Andrea Fosfuri
Abstract: This Paper empirically investigates two important determinants of international activity through wholly owned operations, joint-ventures and licensing, namely country risk and IPRs protection. Using a comprehensive database on investments in chemical plants during the period 1981-96, we show that higher levels of country risk are associated with less activity into recipient economies. The analysis also suggests that international activity with smaller resource commitment tends to be preferred in countries with higher levels of risk, and that multinational investment is more responsive to changes in risk conditions than indigenous investment. After controlling for several country characteristics, we do not find IPRs protection playing a significant role in fostering international activity or conditioning its mode.
Keywords: chemical industry; country risk; foreign direct investment; IPRs protection; technology licensing
JEL Codes: F21; F23; O32; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher country risk (F34) | Decreased international activity (F59) |
| Higher country risk (F34) | Decreased foreign direct investment (FDI) (F21) |
| Higher country risk (F34) | Preference for joint ventures and technology licensing (L24) |
| Increased country risk (F34) | Higher likelihood of shifting investments to safer environments (G11) |
| IPRs protection (O34) | No significant role in international activity (F59) |