The relationship between foreign direct investment and international trade. Substitution or complementarity? A survey

Theoretically, the explanatory approaches of foreign direct investment (FDI), as for example, the internalization theory and the eclectic paradigm, and general equilibrium trade models that incorporate horizontal multinational firms (MNEs), sustain the existence of a substitution relationship between FDI and international trade. Models of vertical FDI and considerations concerning demand, for their part, support a complementarity relationship. Empirically, however, it is difficult to find substitution between the two variables. This work presents a review of the existing theoretical and empirical literature, highlighting the reasons that underlie the apparent incongruity between theory and empirical works, and drawing attention to gaps that should be corrected in future works.

[1]  A. Serra.  Event Study Tests: A Brief Survey , 2007 .

[2]  Jorge M. S. Valente,et al.  An exact approach to early/tardy scheduling with release dates , 2005, Comput. Oper. Res..

[3]  Jorge M. S. Valente,et al.  Improved lower bounds for the early/tardy scheduling problem with no idle time , 2005, J. Oper. Res. Soc..

[4]  Jorge M. S. Valente,et al.  Improved heuristics for the early/tardy scheduling problem with no idle time , 2005, Comput. Oper. Res..

[5]  Maria Manuel Pinho,et al.  Political models of budget deficits: a literature review , 2004 .

[6]  P. Gil.  A Model of Firm Behaviour with Equity Constraints and Bankruptcy Costs , 2003 .

[7]  Pedro Vieira.  The Impact of Monetary Shocks on Product and Wages: A neoclassical aggregated dynamic model , 2003 .

[8]  A. Teixeira,et al.  Human Capital, Innovation Capability and Economic Growth , 2003 .

[9]  C. Barbot.  Does airport regulation benefit consumers , 2003 .

[10]  A. Serra.  The Cross-Sectional Determinants of Returns: Evidence from Emerging Markets' Stocks , 2003 .

[11]  Á. Almeida.  40 Years of Monetary Targets and Financial Crises in 20 OECD Countries , 2003 .

[12]  Jorge M. S. Valente.  Using Instance Statistics to Determine the Lookahead Parameter Value in the ATC Dispatch Rule: Making a good heuristic better , 2003 .

[13]  A. Teixeira.  Does inertia pay off? Empirical assessment of an evolutionary-ecological model of human capital decisions at firm level , 2003 .

[14]  Douglas P. Woodward,et al.  A Tractable Approach to the Firm Location Decision Problem , 2003, Review of Economics and Statistics.

[15]  A. Teixeira.  ON THE LINK BETWEEN HUMAN CAPITAL AND FIRM PERFORMANCE. A THEORETICAL AND EMPIRICAL SURVEY , 2002 .

[16]  M. M. Martins,et al.  Macroeconomic Volatility Trade-Off and Monetary Policy Regime in the Euro Area , 2002 .

[17]  Luis Delfim Santos,et al.  A Qualidade de Vida Urbana - O caso da cidade do Porto , 2002 .

[18]  Bruce A. Blonigen,et al.  Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment , 2002 .

[19]  M. M. Martins,et al.  Trend, Cycle and Non-Linear Trade-Off in the Euro Area 1972-2001 , 2002 .

[20]  S. Castro,et al.  Objectives of Public Firms and Entry , 2001 .

[21]  Carlos F. Alves,et al.  Corporate Governance Policy and Company Performance: The Case of Portugal , 2001 .

[22]  Carlos Machado-Santos,et al.  Avaliação de Estratégias de Investimento com Opções , 2001 .

[23]  C. Barbot.  Industrial Determinants of Entry and Survival: The case of Ave , 2001 .

[24]  Luís Fernando da Rocha,et al.  Avaliação de Pequenas e Médias Empresas e Gestão de Risco , 2001 .

[25]  Margarida de Mello,et al.  The Forecasting Ability of a Cointegrated VAR Demand System with Endogeneous vs. Exogenous Expenditure Variable: An application to the UK imports of tourism from neighbouring countries , 2001 .

[26]  Salvador Barrios,et al.  Multinational Enterprises and New Trade Theory: Evidence for the Convergence Hypothesis , 2001 .

[27]  C. Barbot.  Horizontal Merger and Vertical Differentiation , 2001 .

[28]  Celsa Machado.  Measuring Business Cycles: The Real Business Cycle Approach and Related Controversies , 2001 .

[29]  Óscar Afonso,et al.  The Impact of International Trade on Economic Growth , 2001 .

[30]  K. Head,et al.  Overseas Investment and Firm Exports , 2001 .

[31]  Luis Brandao Marques,et al.  Modelos Dinâmicos com Dados em Painel: Revisão da Literatura , 2000 .

[32]  Rui Henrique Alves.  Da Moeda Única à União Política , 2000 .

[33]  J. Mucchielli,et al.  Investissements directs à l'étranger des multinationales françaises et relations commerciales avec leurs filiales. Une analyse sur données individuelles d'entreprises , 2000, Revue économique.

[34]  K. Clausing.  Does multinational activity displace trade , 2000 .

[35]  J. Markusen.  Trade Versus Investment Liberalization , 1997 .

[36]  Michael Pfaffermayr,et al.  Foreign outward direct investment and exports in Austrian manufacturing: Substitutes or complements? , 1996 .

[37]  J. Markusen,et al.  A Unified Treatment of Horizontal Direct Investment, Vertical Direct Investment, and the Pattern of Trade in Goods and Services , 1996 .

[38]  J. Markusen,et al.  Multinational Firms and the New Trade Theory , 1995, World Scientific Studies in International Economics.

[39]  S. Lael Brainard.  An Empirical Assessment of the Proximity-Concentration Tradeoff between Multinational Sales and Trade , 1993 .

[40]  S. Lael Brainard.  A Simple Theory of Multinational Corporations and Trade with a Trade-Off between Proximity and Concentration , 1993 .

[41]  Ignatius J. Horstmann,et al.  Endogenous market structures in international trade (natura facit saltum) , 1992, World Scientific Studies in International Economics.

[42]  John Mutti,et al.  Taxes, Tariffs and Transfer Pricing in Multinational Corporate Decision Making , 1991 .

[43]  Ignatius J. Horstmann,et al.  Endogenous Market Structures in International Trade , 1990 .

[44]  R. Lipsey,et al.  Foreign Production and Exports of Individual Firms , 1984 .

[45]  Elhanan Helpman,et al.  A Simple Theory of International Trade with Multinational Corporations , 1984, Journal of Political Economy.

[46]  J. Markusen,et al.  MULTINATIONALS, MULTI-PLANT ECONOMIES, AND THE GAINS FROM TRADE , 1984, World Scientific Studies in International Economics.

[47]  R. Lipsey,et al.  Foreign Production and Exports in Manufacturing Industries , 1981 .

[48]  J. Dunning.  Toward an Eclectic Theory of International Production: Some Empirical Tests , 1980 .

[49]  J. Dunning.  The future of the multinational enterprise , 1974 .

[50]  S. Castro,et al.  Public Firms in a Dynamic Third Market Model , 2001 .

[51]  Mário Rui Silva,et al.  Crescimento Económico Nas Regiões Europeias: Uma Avaliação Sobre A Persistência Das Disparidades Regionais No Período 1980-95 , 2000 .