Foreign direct investment in American service sectors: Source country contrasts and locational determinants

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5 Citations (Scopus)

Abstract

Foreign direct investment in United States service sectors is an essential component of the competition among global industrial core regions. European, Canadian, and Japanese firms generate most foreign services jobs. Acquisition is the favored mode of entry and foreign establishments are generally larger and pay higher wages than their domestic counterparts. Though the surge of foreign investment in the 1980s was sectorally extensive, jobs in foreign services firms grew much faster than those in manufacturing. This paper reports a regression analysis of the location of foreign employment in six disaggregated sectors across U.S. states in 1987. The results show that foreign and domestic interstate locational patterns of employment strongly correlate. Because acquisition is the most common mode of entry, this empirical finding suggests that the supply of acquisition candidates primarily decides foreign investors' locational choices. Additional influences on location include the concentration of jobs in foreign business and professional services firms in localized areas of production, a general attraction of foreign investors in most service sectors to states with skilled labor forces, and an avoidance of Rocky Mountain and Great Plains states. I found little evidence that foreign investors in services avoid high-wage states more than their domestic counterparts.

Original languageEnglish (US)
Pages (from-to)397-433
Number of pages37
JournalPapers in Regional Science
Volume75
Issue number3
StatePublished - Jul 1996

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service sector
foreign direct investment
tertiary sector
Foreign Service
direct investment
foreign investment
investor
determinants
firm
wage
service job
industrial region
skilled labor
labor force
regression analysis
manufacturing
candidacy
supply
mountain
evidence

ASJC Scopus subject areas

  • Environmental Science (miscellaneous)
  • Geography, Planning and Development

Cite this

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abstract = "Foreign direct investment in United States service sectors is an essential component of the competition among global industrial core regions. European, Canadian, and Japanese firms generate most foreign services jobs. Acquisition is the favored mode of entry and foreign establishments are generally larger and pay higher wages than their domestic counterparts. Though the surge of foreign investment in the 1980s was sectorally extensive, jobs in foreign services firms grew much faster than those in manufacturing. This paper reports a regression analysis of the location of foreign employment in six disaggregated sectors across U.S. states in 1987. The results show that foreign and domestic interstate locational patterns of employment strongly correlate. Because acquisition is the most common mode of entry, this empirical finding suggests that the supply of acquisition candidates primarily decides foreign investors' locational choices. Additional influences on location include the concentration of jobs in foreign business and professional services firms in localized areas of production, a general attraction of foreign investors in most service sectors to states with skilled labor forces, and an avoidance of Rocky Mountain and Great Plains states. I found little evidence that foreign investors in services avoid high-wage states more than their domestic counterparts.",
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