Publication Type

Working Paper

Version

publishedVersion

Publication Date

6-2020

Abstract

Utilizing industry-level foreign direct investment (FDI) from 72 source markets to 122 destination markets between 2003 to 2018, we apply a differences-in-differences approach to evaluate the response of technology FDI to recessions. We find that research and development (R&D) intensive FDI drops when the destination market is in recession and the source market is in a normal state, and recovers to the pre-recession levels when both destination and source markets are in recession. The result is particularly pronounced in deep and long recessions, during the propagation stage of recessions, and in destination markets with stronger intellectual property protection, looser FDI regulation, and higher financial development. These recession impacts are limited to R&D intensive FDI between advanced markets: there is no evidence that R&D intensive FDI from or to emerging markets respond to either destination or source market recessions.

Keywords

Technology, R&D, Recession, FDI, Multinational Corporations

Discipline

Finance | International Economics

Research Areas

International Economics

Identifier

10.2139/ssrn.3636257

Publisher

SSRN

Additional URL

http://doi.org/10.2139/ssrn.3636257

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