This thesis analyses the main characteristics of China's inward foreign direct investment (FDI) and its effects on the Chinese economy at both aggregate and disaggregated levels. The purpose of this thesis is to address the following issues: first, to examine the interactions between China's policy towards FDI and multinational firms' investment decisions, and second, to investigate two-way relationships between inward FDI, economic growth and external trade as well as the sectoral pattern of FDI. In order to explore these questions, a theoretical model is constructed to extend the existing theory by taking account of the special characteristics of China's inward FDI. This model illustrates the key role of export requirements that constitute the major feature of inward FDI. Empirical analysis is conducted to investigate the impact of FDI on the Chinese economy by applying a variety of Granger causality tests. The results indicate the presence of two-way relationships between inward FDI, economic growth and external trade. The empirical study also tests the main determinants of the sectoral distribution of FDI and its effect on labour productivity. The main findings from theoretical and empirical studies have important policy implications for the development strategies of China and other developing countries.

This thesis consists of three essays on either knowledge flows, international economics, or entrepreneurship. The first chapter focuses on knowledge flows and foreign direct investment. The second chapter aims to understand the pattern of cross-country equity portfolio allocations. The third chapter focuses on how entrepreneurship practices across countries is affected by bureaucratic circumstances. Chapter I investigates whether FDI is a channel through which knowledge spills over from the foreign multinational to the host country. I analyse whether patents developed by local inventors in Central and Eastern Europe (CEE) cite the stock of patents of FDI multinationals more often after these companies have established themselves in CEE. Using a newly hand-collected data sample on privatisation cases resolved during the 1990s, I find that winning bidders experience a 20% greater increase in citations received by the host country compared to the losing bidder. Chapter II presents a model of international portfolio choice based on crosscountry differences in relative factor abundance. The change in factor prices after a positive shock in a particular country provides insurance to countries that have dissimilar factor endowment ratios. The main prediction is that countries with similar relative factor endowments have a stronger incentive to invest in one another for insurance purposes. Empirical evidence supports our theory. Chapter III presents a model of corporate finance that incorporates bureaucratic start-up costs and where sectors differ in their need of external capital. The main theoretical prediction is that a reduction in start-up costs leads to an increase in the share of value added and number of firms in sectors with greater external finance. Intuitively, the sector with high external finance experiences a greater improvement in economies of scale, thereby making it more attractive to consumers. Using sector-country level data on manufacturing production, I find support for the predictions of the model.

Like many other emerging economies, the Gulf Cooperation Council (GCC) countries', the Kingdom of Saudi Arabia (KSA) in particular, and to a lesser extent Egypt and Jordan, have been reforming and developing their foreign direct investment (FDI) regulations to attract more investment. The GCC states witnessed a boom period during the 1970s and 1980s during which, however, there was no significant inflow of FDI into the region. Recently, the economy has been booming again in the GCC countries, due to the increase in oil prices coupled with the huge repatriation of cash from the USA and a number of European countries in the wake of the events of September 11. Accordingly, some reports claim that liquidity has reached its highest point ever in the GCC states. It has been reported that some of this money has been redirected to investments in neighbouring countries, including Egypt and Jordan. Concerns about the present situation are, firstly, that most of these liquid funds are invested in the stock market (see Chapter 4), which means that there is no significant added value from these investments; and secondly, that there is a limited inflow of FDI into the region.

The aim of this thesis is to examine the underperformance of the Greek economy in relation to attracting foreign direct investment (FDI) in the manufacturing sector. Two other European Union peripheral countries, specifically Ireland and Portugal, are used as a benchmark. For this purpose three sets of contextual literature have been explored. I first examine the theory of the French regulation school in order to comprehend the development of the European economy and how Greece, Ireland and Portugal have been placed within it, emphasising particularly the ideas associated with peripheral Fordism. Then, I refer to the location theory literature in order to identify the factors influencing the location decisions of firms. Finally, I look upon the literature relating to multinational corporations1 in order to identify their evolution and the particular factors influencing their locational decision making process. From this study two key factors have been identified that might attribute to the underperformance of Greece in relation to FDI: the Greek institutional framework and the failure of policy makers in Greece to understand the dynamics of capitalist development. The research of these hypotheses consists the essence of the empirical investigation. The empirical analysis takes place through a questionnaire survey of the current multinational enterprises (MNE) in manufacturing sector in Greece, supplemented by follow- up interviews with managers of foreign subsidiaries located in Greece and policy makers of the Greek state. From the above theoretical and empirical analysis the institutional structures in Greece have been identified as the main cause for the FDI inflows underperformance, enhanced by the geographical peripherality of Greece and the increasing competition from the countries of East-Central Europe as a result of communism collapse and their entrance in the European Union.

This study of foreign direct investment (FDI) in Thailand fills a gap since no such studies exist for Thailand. After an introduction to Thailand's economy, the thesis presents a brief survey of the theories of FDI with reference to the less-developed countries. It is followed by a study of the country-wise and sector-wise pattern of FDI in Thailand. The next two chapters carry out empirical tests of the capital-intensity hypothesis and the raw-material availability hypothesis respectively. Both the hypotheses are found to be statistically acceptable in the case of Thailand. This is followed by a simple test of the tariff-jumping hypothesis which does not explain FDI in Thailand. This should be viewed with caution as only nominal rates (as opposed to effective rates of protection) are used. Then, a test of a joint hypothesis (capital intensity, raw-material availability, and tariff rates) confirms the relative prominence of the capital- intensity hypothesis. The relative wage-cost hypothesis (i.e., Thai wage-rates relative to the Japanese and West German wage-rates) is found to be statistically unacceptable in the case of Thailand. lastly, welfare effects of FDI are examined. A brief survey of the literature and a critical appraisal have been presented. So far as Thailand is concerned, the general weight of the various arguments leans to the conclusion that foreign direct investments have ameliorative effects. This conclusion is based on (i) an analytical examination of the welfare implications of Thailand's over-all pattern of FDI, (ii) a statistical analysis of the macroeconomic effects, (iii) an analysis of the environmental issues by examining the chemical properties of the products produced by foreign firms in the Chemical Sector, and (iv) a study of the desired pattern of investment in the Thai economy as envisaged in the Five Year Plans and the ex post sectoral pattern of FDI.

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Over the last two or three decades increasing and ever accelerating trends of environmental degradation have been recorded and widely reported in a number of international scientific works. As is often claimed, this situation is particularly attributable to globalization and the widespread increase of economic activities. The recognition that FDI represents a relevant part of globalization raises various concerns. However, its environmental implications are not easy to identify and this gives rise to complex arguments and contradictory views. This work aims to give a modest contribution to the scientific reflection on the FDI-environment relationship and is structured as follows. The first chapter introduces the main aspects of FDI and identifies the links characterizing its relationship with the natural environment. The second chapter provides a literature review. The third chapter is entirely dedicated to the empirical analyses which attempt to go beyond what is done in the literature. In fact, in addition to a major interest in trade, a particular orientation to develop analyses on national aggregated data is generally observed. Our work, instead - and this might be perceived as its original contribution - investigates the mentioned relationship at the level of specific activity sectors. Through the use of the econometric technique of panel data, a purpose-built dataset is investigated to mainly observe the effect that FDI inflowing in the "agriculture and fishing", the "manufacturing" and the "transport and communication" sectors of the OECD countries generates on the level of some considered pollutants. More specifically, the analysis of the "agriculture and fishing" sector focuses on both the FDI-CH4 (over the period 1990-2005) and FDI-CO2 from the sectoral fuel combustion (over the period 1981-2005) relationships. The "manufacturing" and "transport and communication" sectors are analysed only on the basis of the FDI-CO2 from the sectoral fuel combustion relationship (over the period 1981-2005). Two final chapters are respectively dedicated to the concluding discussion and policy considerations of the work. The results of our analyses, expressed in terms of cumulative effects, show that when the investigation of the "agriculture and fishing" sector is made to observe the CH4-FDI relationship, the coefficient results equal to + 0.0427 + 0.0018 FDI, this showing the increase of Methane emission when FDI grows by 1%. When the "agriculture and fishing" sector is analysed in relation to the CO2-FDI relationship, the cumulative effect coefficient becomes equal to - 0.0848 - 0.0036 FDI, this representing the response of CO2 as a result of 1% growth of FDI. The cumulative effect coefficient for the "manufacturing" sector is equal to + 0.0058 + 0.0014 FDI which represents the increase of the sectoral CO2 from fuel combustion when FDI grows by 1%. Finally, the coefficient of the cumulative effect for the "transport and communication" sector is found equal to + 0.0027 + 0.0014 FDI, this representing the growth of the sectoral CO2 from fuel combustion as a result of a 1% increase of FDI. If the inflow of FDI in each sector is considered at the sample mean value, then for "agriculture and fishing" an actual cumulative impact of +0.0213 is observed for the CH4-FDI and another of -0.0436 for the CO2-FDI relationship. An actual cumulative impact equal to +0.0051 is observed for the CO2-FDI relationship in the "manufacturing" sector and another of +0.0022 for the CO2-FDI in the "transport and communication" sector (values in natural logarithm of CO2 in Mt). Apart from the interpretation of the algebraic signs, which would make us say that FDI is beneficial to the environment when the sign of the identified effect is negative and vice-versa, it is worth underlining how a closer look at the quantitative aspect of our results would allow us to highlight the nearly-zero value and the almost neutral role that FDI exerts on the considered environmental indicators. This is also confirmed by the very small and almost quantitatively insignificant results achieved from assessing the impact FDI exerts on the considered pollutants through GDP. With regard to the "agriculture and fishing" sector, the impact of FDI on CO2 through GDP cannot be identified due to the insignificant result achieved in the estimation of the CO2-GDP relationship. Apart from this, however, an outcome equal to -0.0003 is observed when the impact of FDI inflowing in the "agriculture and fishing" sector on CH4 is assessed through GDP (with FDI and GDP considered at their sample mean value respectively). Similarly, a result of +0.00002 is observed when assessing the impact of FDI on CO2 through GDP in the manufacturing sector and another of +0.0006 when the "transport and communication" sector is made the subject of attention (values in natural logarithm of CO2 in Mt).

The growth of Chinese MNEs has stimulated great interest in their outward foreign direct investment (FDI) strategies. This thesis attempts to contribute to the theoretical debate as to the usefulness of extant MNE conceptual and theoretical models. Theoretical frameworks are tested through the analysis of Chinese MNE FDI to developed economies, which are rich in strategic assets. The thesis is broken down into five main chapters. Chapter one examines the literature on Chinese MNEs and the conceptual frameworks used to understand their international investment behaviour in developed economies. Chapter two contributes to the rapidly growing theoretical literature set on Chinese MNEs which argues they use aggressive acquisitions, often to psychically distant, developed host countries, to obtain the strategic assets that they themselves lack. My results are broadly supportive of the growing theoretical literature on Chinese MNEs, arguing acquisitions are the primary mode of strategic asset seeking in developed markets. Chapter three evaluates the outcomes of strategic asset acquisitions. This chapter focuses specifically on the extent to which Chinese MNEs are able to absorb and productively harness the intangible strategic assets of their developed market acquisitions. In this chapter, I find no significant results for target country patent generation. Domestic (Chinese market) patents, however, rise significantly in the wake of acquiring an innovative firm from Japan, the US or Europe. Chapter four analyses the efficacy of developed market policies in generating FDI from China. I find that the presence of investment promotion agencies significantly increases the propensity for a Chinese firm to locate in a given location. Chapter five provides the conclusion for this thesis.

In this thesis I investigate how the FDI Policy environment affects certain aspects of firm behaviour. First, I introduce the option value of foreign direct investment into a framework of Dixit-Stiglitz type monopolistic competition. Starting from a pure trading equilibrium and solving for the optimal foreign investment rule gives a scale-up factor, which implies existence of a wedge between mark-up revenues and foreign investment costs. Greater volatility and risk aversion increase this scale-up over foreign investment costs implying a delay in the exercise of FDI option. The model is extended to include a Poisson jump process, which has policy implications for FDI reforms. This model explains 'wait and watch' behaviour of multinational firms better than a pure comparative advantage-trade cost framework does. Second, I develop a model of firm heterogeneity with market power. Mark-ups are endogenous and responsive to toughness of market competition. It brings out potential gains in market power and profits as an additional reason for undertaking FDI in addition to reasons already enshrined in the literature as proximity-concentration trade-off. The model is used to analyse the interaction between profit maximizing behaviour of multinational firms and the welfare maximizing objective of the central planner. FDI is not an unambiguously welfare improving proposition. While multinational firms gain profits, host and home country may gain or lose welfare depending on how returns from foreign investment are distributed among the residents of the home and the host economies. Third, I analyse the relationship between foreign investment policy and manufacturing firms' performance as estimated by multi-factor productivity against the backdrop of Indian liberalisation of the 1990's. Using a firm-year panel from 1989 to 2004, I obtain consistent estimates of firm's production functions and controlling for industrial delicensing and trade reforms, estimate the effect of foreign investment policy on measured productivity of manufacturing firms. I find liberalisation of foreign investment regime has significantly improved manufacturing firms' performance in India over this period. A particularly interesting feature of India's foreign investment regime has been encouraging adoption of foreign technology by domestic firms, while at the same time opening up these industry sectors to foreign direct investment. These two elements of the foreign investment regime have actually been complementary to each other.