The influence of intangible assets, spillovers, and competition on foreign direct investment survival and entry time.

I argue that the level of parent intangible assets, spillovers from firms that have previously undertaken foreign direct investment, and competition influence the success of foreign direct investment. I expect the likelihood of foreign direct investment success to increase with the level of intangible assets and spillovers. I expect the likelihood of success to decrease with competition. The existence of spillovers suggest that foreign direct investment will be more successful if firms that have the ability and incentive to capture spillovers delay entry and expand when there is a larger foreign presence in the target industry. Firms with the ability and incentive to capture spillovers have existing operations in the foreign country but not in the foreign industry that they enter. Because competition decreases the likelihood of survival, firms that delay entry too long will be less likely to succeed. If firms are aware of these relationships, those that expand early and do not wait for spillovers will tend to be firms that are unable to capture spillovers. Early entrants will also include firms that can capture spillovers but have poorer performance and fewer intangible assets prior to expansion than those that delay entry. The success measure in this study is whether or not the foreign parent continued to control its investment after five years (survival of the operations in the host country). The sample consists of 366 foreign entries into American manufacturing industries in 1987, 277 of which survived. Logistic regression is the statistical method. The empirical results show support that information and investment spillovers increase the likelihood of foreign direct investment survival for firms with existing operations in the foreign country but not in the foreign industry that they enter. In addition, there is weak support that firm intangible assets increase the likelihood of survival, although the test is limited due to data availability. There is little empirical evidence that competition decreases the likelihood of survival, but this is consistent with firms rationally choosing not to expand when competition is intense. Finally, there is weak evidence that firms incorporate the benefits of spillovers into their decisions of when to undertake foreign direct investment.Ph.D.Business administrationCommerce-BusinessManagementSocial SciencesUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/129310/2/9423315.pd