DP4601 Determinants of International Activity: Evidence from the Chemical Industry

Author(s): Andrea Fosfuri
Publication Date: September 2004
Keyword(s): chemical industry, country risk, foreign direct investment, IPRs protection, technology licensing
JEL(s): F21, F23, O32, O34
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4601

This Paper empirically investigates two important determinants of international activity through wholly owned operations, joint-ventures and licensing, namely country risk and IPRs protection. Using a comprehensive database on investments in chemical plants during the period 1981-96, we show that higher levels of country risk are associated with less activity into recipient economies. The analysis also suggests that international activity with smaller resource commitment tends to be preferred in countries with higher levels of risk, and that multinational investment is more responsive to changes in risk conditions than indigenous investment. After controlling for several country characteristics, we do not find IPRs protection playing a significant role in fostering international activity or conditioning its mode.