B.16 Robustness 3: Logit Estimation

TABLE B.16 Robustness 3: Logit Estimation

Variable (1) Goods production (2) Services operations (3) Trade supporting

Productivity

State-owned 0.462*** (0.077)

Foreign

Family

Export history

Ethnic network

Internal funds

Intraconglomerate loans

Home commercial banks

International banks −0.018 (0.398) 0.398 (0.262) 1.570*** (0.332) 0.818 (0.643) 1.475*** (0.306) 0.844 (0.626) 1.224*** (0.363) 0.926

(0.626) Host commercial banks −0.313 (0.623)

Host local investors 0.099 (0.415)

Distance

Contiguity

Common language

Common colonizer

Constant

Observations

Destination fixed effects −2.656*** (0.628) 0.174 (0.439) 0.125 (0.472) 0.664 (0.904) 17.184*** (5.613) 18,364 Yes

Source fixed effects Yes 0.355*** (0.067)

0.482* (0.268) −0.637*** (0.188) 1.643*** (0.224) 1.555*** (0.360) 1.267*** (0.189) 0.044 (0.467) 0.442** (0.218) 0.254

(0.458) −0.046 (0.580) −0.808 (0.527) −2.299*** (0.329) 0.241 (0.211) −0.249 (0.307) −1.631 (1.009) 15.865*** (2.984) 18,550

Yes

Yes 0.323*** (0.050)

−0.565 (0.398) 0.337* (0.183) 2.004*** (0.196) 1.199*** (0.398) 1.156*** (0.183) 1.252* (0.641) 0.293 (0.249) 0.637

(0.587) −0.302 (1.018) 0.335 (0.313) −1.547*** (0.232) 0.344* (0.198) −0.523* (0.292) −1.258** (0.513) 9.473*** (2.061) 20,981

Yes

Yes

Note: Firm-level clustered standard errors are in parentheses. Coefficients are not marginal effects. — = not available. *** p < .01, ** p < .05, * p < .1.

Glossary

Affiliate: The company receiving the investment abroad.

Asset-light business model: A strategy that reduces the traditional amount of capital needed to start a business, and instead offers a share of revenue to capital owners, such as hotels run using management contracts and shared economy–type businesses.

Brownfield investment: The lease or purchase of a preexisting facility in a foreign country.

Export platform foreign direct investment: Investing in a foreign location with the primary purpose of serving a third market.

Foreign direct investment enterprise: An incorporated enterprise in which a foreign investor has at least 10 percent of the shares or voting power.

Fixed entry costs: Costs incurred in the process of market entry that do not vary with the quantity of output.

Goods production investment: Investment in agriculture and manufacturing.

Greenfield investment: The process of a company building its own facilities abroad from the ground up.

Horizontal foreign direct investment: Duplication of production abroad for sales in the destination to avoid trade costs.

Investment hubs: Jurisdictions offering investor services that facilitate international investment. Larger than tax havens, these jurisdictions have substantial real economic activity and attract multinational enterprises through their favorable investment conditions.

Parent: The company making the investment abroad.

Relational contracting: Relationships in which contracting parties behave in an expected manner to sustain the relationship in the long term, although such behavior is not explicitly stipulated in a transactional contract.

Roundtripping: The channeling abroad by direct investors of local funds and the subsequent return of these funds to the local economy in the form of foreign direct investment.

Services operations investment: Investment in facilities such as hotels, hospitals, schools, warehouses, retail, banks, logistics firms, headquarters, call centers, research and development centers, or offices in general.

Sticky global value chains: A propensity for a global value chain relationship to exist beyond its optimal period because of relation-specific investments already incurred within a value chain; it represents a status quo bias.

Sticky knowledge: Imperfect information flows between parties resulting from motivational factors and information barriers.

Sunk entry costs: Unrecoverable fixed costs that must be incurred to make the entry decision into a market, regardless of whether the market is eventually entered.

Switching costs: Additional costs incurred to switch suppliers or distributors or engage in new relationships; higher expected profits could be necessary to switch partners.

Tax havens: Jurisdictions whose economies are mostly dedicated to the provision of offshore financial services.

Trade-supporting services investment: Investment in small sourcing, marketing, or representative offices, with five or fewer employees.

Transfer pricing: Firms and their subsidiaries or related firms overinvoice or underinvoice for goods and services to shift profits to a low-taxation territory.

Turnkey operations or concession contracts with some own financing (a minimum

threshold of 10 percent) as a contractor: Engineering, procurement, and construction projects and other similar forms of contracting that are common in the construction industry, public utilities provision, and some public asset management.

Vertical foreign direct investment: Foreign direct investment driven by factor price differences to produce a product or value chain activity abroad. A firm chooses to minimize costs by fragmenting the production process, setting up different stages of production in different countries according to comparative advantage.