Academic journal article Journal of International Business Research

A Predictive Model of Munificence for Us Manufacturers Using FDI as an Indicator of Globalization

Academic journal article Journal of International Business Research

A Predictive Model of Munificence for Us Manufacturers Using FDI as an Indicator of Globalization

Article excerpt

ABSTRACT

Industry's ability to produce consistent positive economic performance in the region it operates is critical for a successful economy. Globalization introduces competition to regional industries that now compete worldwide for capital, which is used to produce economic output and jobs. US based jobs and wealth are being lost to offshore manufacturers through the globalization process, which in turn has a significant economic and political impact. Therefore globalization needs to be researched empirically to support better economic and financial decisions which are influenced by this force.

Foreign direct investment (FDI) is an excellent measurement or proxy for many aspects of globalization. Munificence is a well-researched industry task environment dimension. This project presents a model demonstrating that foreign direct investment (FDI) as a measure of globalization is a significant predictor of munificence for manufacturers in the USA. The featured model is useful to economists and development planners because it begins to build empirical data for FDI as a predictive indicator of economic activity for manufacturers. To date most of the literature studying FDI evaluates it as a dependent variable and typically analyzes what factors attract FDI. While this is important it is not the only useful way to study FDI.

INTRODUCTION

Globalization is a significant economic force that must be better understood by contemporary stakeholders of business. Economic policy makers and investors must effectively anticipate the impact of globalization to their areas of responsibility or expose these interests to great risk. Offshoring of white collar jobs and the loss of manufacturing jobs to countries able to produce at a lower cost are real life examples of this risk.

Foreign Direct Investment (FDI) is an excellent quantitative indicator of activity related to globalization and economic development. FDI is a variable that measures an important aspect of globalization processes, i.e. the economic integration of activities performed in different regions of the world. (World Bank, 2005) FDI has been used in a wide variety of economic development research studies. Empirical FDI research has been shown to have a casual relationship to transaction costs in Dunning's Eclectic Model (Dunning,1976), to value chains (Melitz, Helpman, Yeaple, 2003), and to product cycles (Vernon, 1966).

However little research exists demonstrating the effect of FDI on the so-called business task environment in mature economies. Recently Jiang and Beamish build the case for more research in this area. "Research on determinants of FDI and outcomes of internationalization has greatly enhanced our understanding of MNEs. In comparison, the question of how firms actually expand and profit in foreign markets receives limited attention. One reason might be that strategic management research has placed more emphasis on content-based rather than process based strategic features. Another reason might be the lack of longitudinal data that are needed for studying the foreign expansion process." (Jiang and Baemish, 2004)

The purposed model begins to fill the research void of foreign ownership research. We do this from an industry sector perspective using the so-called business task environment. A second important objective of this model is to extend the academic literature on FDI as an empirical measure of globalization and it's impact on the economy.

Dess and Beard narrowed the scope of the literature on the business task environment and establish environmental dynamism, munificence, and complexity as the key dimensions recognized by researchers for capturing operating environment and risk for business (Dess, Beard, 1984). Recently, these dimensions have been recognized in the literature as factors affecting a firms ability to innovate. (Modarres, Beheshtian, Ispahani, 2003).

Munificence is closely associated with sustained sales growth in an industry or business sector. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.