The Labor Market Effects of Foreign Direct Investment and Institutional Changes in The United States

The role of foreign capital as a job creator is becoming increasingly important in the context of globalization. Although the purpose and scale of their business activities may vary, foreign investors’ entry into a host country often creates a large number of jobs for local populations. In this process, the government usually plays an intermediary role to maximize the benefits generated by foreign firms. This dissertation describes the labor market effects of multinational enterprises (MNEs) in relation to the ways in which government policies and the sources of foreign capital come into play in this process. This study is based on both quantitative and qualitative data. I have drawn data from the U.S. Census Bureau’s County Business Patterns (CBP) database, the Bureau of Economic Analysis’s (BEA) Foreign Direct Investment in the United States (FDIUS) database, and American Community Survey for quantitative analysis. In addition, I have supplemented the statistical results with in-depth interviews with corporate executives, managers, government officials, and staffing agencies’ managers and archival data from both the firms and the local government. The findings focus on labor market changes driven by foreign capital along with institutional shifts. First, I describe the ways in which foreign businesses change their patterns of manufacturing activities and create employment at the state level in response to domestic institutions. Next, I analyze how foreign manufacturing investments originating from different sources result in different labor market outcomes at the local level in response to international institutions. Lastly, I corroborate that state-level institutions, or state governments’ economic policies play important intermediary roles in influencing the relationship between foreign investors and the host labor market. I discuss the implications of these findings for research on organizations and the labor market in the global context and for understanding the importance of governmental policies in promoting economic development