What Drives U.S. Outbound Foreign Direct Investment in the Asian and Pacific Region? -Industry-Level Evidence from A Panel Data Study-

Abstract

This paper searches for the determinants/predictors of the U.S. industrial entry into the Asian and Pacific region. The em-pirical results obtained by static panel data econometric model-ing contribute to the literature in two dimensions. First, favor-ing both location-and internalization-theoretic hypotheses, they demonstrate that the U.S. manufacturing foreign direct invest-ment(FDI) in the region increases as the industry size and in-tangible managerial resources/advantages increase at home. Sec-ond, they evidence strong industry-and time-specific effects(un-explained by explanatory variables included) that enable us to identify industries making greater of smaller FDI than a partic-ular reference industry, and to infer effects on FDI of such time-varying factor as foreign exchange rates by refering to a particular fiscal year. Together, these results portray a fruitful panel data econometric picture of U.S. FDI determinants that sheds light on the theory of multinational corporate FDI behavior, as applied to the Asian and Pacific region.