Date of Award

8-2012

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Legacy Department

Policy Studies

Advisor

Roth, Aleda V

Committee Member

Ulbrich , Holley

Committee Member

Stewart Jr. , Joseph

Committee Member

Fine , Jeffrey

Abstract

This dissertation analyzes selected policies designed to attract foreign direct investment (FDI) as a means of economic growth. The focus is on multinational corporations (MNCs) because most foreign direct investment is done by MNCs. The dissertation first shows the effects that the presence of MNCs has on economic growth before examining tradeoffs between direct costs (i.e., transportation and production costs) and policy factors in attracting MNC FDI.
Essays 1, 'Multinational Corporations and Their Effect on Gross Domestic Product' and 2, 'Competing for Innovation: The Economics of Knowledge Acquisition' examine how FDI in combination with socioeconomic, economic, and policy factors affect the growth of gross domestic product (GDP). The collective results suggest that policies of regionalization drive GDP growth and influence FDI location. Nations that are corporate homes of the largest and most internationalized MNCs benefit from policies of regionalization as they aid the global expansion of their corporations. Importantly, these two essays provide empirical evidence of the value transfer of MNC internationalization back home and of the importance MNC concentration at the national level. The presence of MNC networks provide knowledge and aid in the innovative capacity of both developed and developing countries. Both essays find that GDP growth driven by MNC activity has been stronger in the developing world since 2000. The two essays contribute to the globalization literature by providing empirical evidence of the increasing importance of emerging markets in the new economy, the role of MNCs in that increasing importance, the political and diplomatic implication of these related developments, and the policies nations currently employ to stay competitive in a turbulent environment.
Essay 3, 'Fleeing Regulation: Pollution Havens in Textile Manufacturing' provides an example of the importance of regulatory policy by examining the effect of a policy change on FDI flows in the context of the garment sector. The results indicate that the removal of the quota system in the international trade of garments increased FDI in nations with permissive environmental policies, which in turn, has contributed significantly to leading to toxins and pollutants in local ecosystems.
The dissertation provides empirical evidence that under globalization nations compete for FDI through policy. The extant literature argues that globalization is a product of two sets of factors: (1) reductions in `spatial friction' (i.e., decreasing transportation, information, and organization-of- production costs), and (2) reductions in trade barriers, both in terms of border restrictions and in terms of domestic policies affecting foreign and domestic direct investment. The major contribution of the dissertation is in providing empirical evidence that under globalization nations compete for FDI by creating attractive regulatory environments for MNCs. There are social costs to be born in the competition for FDI and this dissertation shows that the nations that are corporate homes to the world's largest MNCs are often better positioned to absorb costs associated with knowledge sourcing as well as export pollution costs to their more lenient trading partners.

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