Canadian Outward Foreign Direct Investment and Its Implications for the Canadian Economy

The Conference Board of Canada, 44 pages, May 2012
Report by Steven Globerman
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Are outward foreign direct investment and domestic capital investments substitutes or complements? This study uses a literature review and empirical analysis of 22 Canadian multinational corporations to answer this question.

Document Highlights

Are multinational corporations (MNCs) harming their home country economies by outsourcing activities and investing abroad? Canadian Outward Foreign Direct Investment and Its Implications for the Canadian Economy focuses on the economic implications of outward foreign direct investment (OFDI) undertaken by Canadian MNCs.

In addition to a literature review, the activities of 22 Canadian MNCs in 11 different industries are examined. Comparing the record of pairs of MNCs of comparable size and product scope allows examination of the relationship between OFDI and domestic investment while holding other factors roughly constant.

The report concludes that OFDI and domestic investment are more likely to be complements than substitutes for Canadian MNCs; that is, OFDI leads to higher domestic capital investment by Canadian MNCs. On the whole, the evidence provides no support for the concern that MNCs will do less investing in the home country as a consequence of undertaking more OFDI.

Table of Contents

Executive Summary

Chapter 1—Introduction

Chapter 2—Background

  • Supply of Capital
  • Demand for Capital
  • OFDI “Spillovers” and Domestic Capital Investment

Chapter 3—Review of the Literature

  • OFDI and Home Country Capital Investment
  • OFDI, Exports, Employment, and Other Performance Measures
  • Overall Summary

Chapter 4—Methodology

  • Advantages and Disadvantages of Case Studies
  • Sample and Sources of Information

Chapter 5—Strategic Motives for OFDI

  • Predominantly Market-Seeking OFDI
  • Predominantly Resource-Seeking OFDI
  • Overall Summary of Case Studies

Chapter 6—OFDI, Domestic Investment, and Other Firm-Level Performance Indicators

  • Information From Case Studies
  • Empirical Relationships Between OFDI and Domestic Capital Investment
  • OFDI and Other Firm-Level Performance Indicators
  • Overall Summary

Chapter 7—OFDI and Capital Investment by Non-MNCs

Potential Linkages

Chapter 8—Overall Summary and Conclusions

Appendix A—Bibliography

Appendix B—Empirical Relationships Between OFDI and Domestic Capital Investment

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