Title

Firm-Level Relationship between Technological Capability and Foreign Direct Investment

Abstract

This paper reexamines the relationship between FDI and R&D by exploiting firm-level data for 118,300 Japanese manufacturers with no threshold. Our study confirms that the positive association between FDI and R&D is robust even if firms undertaking no FDI and/or no R&D are included. The inclusion of such firms, however, substantially attenuates the relationship. Higher technological capability is positively related with more extensive FDI, especially FDI in industrial countries by firms that have invested in Asia. Firms rich in human skills tend to prefer majority ownership in FDI, as predicted by the internalization FDI theory.

JEL Classifications: F23; L22

Eiichi TOMIURA
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059