Foreign Direct Investment in Services (FDIS)

• Applicants: Professor Dr. Jörn Kleinert; Professor Dr. Horst Raff
• Subject Area: Economic Theory
• Term: from 2008 to 2011
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 55047594

The aim of this project is to develop theories of multinational activities in services. Based on these theories, we analyze determinants and effects of multinational activities in service industries empirically.The relative scarcity of research on FDI in services is surprising for at least four reasons.First, FDI in services as grown faster than FDI in manufacturing particularly in developed countries but increasingly also in developing and transition economies. Second, the continuous process of liberalization of trade in services trade but also the deregulation of key services such as telecommunication and electricity are key issues in international trade negotiations. The growth of FDI in services is mostly due to the limited tradability of many services. It seems crucial to understand which factors facilitate or impede FDI in services.Third, multinational activities in services involve a larger share of non-equity participation than activities in manufacturing. Fourth, FDI in services might have some key implications for economic development that have not been fully explored.We focus on two aspects of multinational activities in services industries:1. In the first part of the project, we want to analyze the role of services within the multinational firm. There are many services that shape the organi/ational form of a multinational firm. Using detailed data at firm level we analyze the drivers behind management services, wholesale and distribution services, and transport activities. 2. In the second part of the project, we focus on the internalization decision of services activities. We analyze the firm-specific determinants of offshoring but also focus on country-specific factors that explain the acquisition of essential service functions from outside parties.

• DFG Programme: Research Grants
• International Connection: France
• Participating Person: Professor Dr. Farid Toubal