A Study On FDI Motivation In Services With Firm Heterogeneity

Multinational service enterprises (MSEs) have gradually dominated the foreigndiecct investment (FDI) in the context of global service economy, which has beenfurther strengthened with the diffusion of financial crisis from virtual economy to realeconomy since2008. Simultaneously, the imbalance and repid developmentrespectively in global economy and seicence&technology make the FDI motivationof multinational enterprises has become increasingly distinct. FDI motivation ischaracterized by gobal value chains, in which intermediate goods are traded infragmented and internationally dispersed production processes. In service sectors,however, the main forms of FDI motivation are expanding market and seeking lowerproduction or operating costs in the host market due to thecharacteristics ofintangibility and unstorage. In the above context, the HMY model proposed byHelpman et al.(2004), which explained the firm’s choice between export and FDI byintroduced firm heterogeneity into the proximity-concentration tradeoff framework,has been expanded to the behavior of FDI motivation of MSEs with the perspectiveof enterprise productivity heterogeneity in this dissertation.Firstly, based on the large sample data of the micro-enterprise level from theWord Bank, and taking the LP approach, which overcoming the simultaneity bias andselection bais, to analyze the productivity heterogeneity of service enterprises and theFDI motivation of MSEs by the definition of FDI motivation which contains twotypes (marketing-seeking and efficiency-seeking). And then, the productivitypremium of FDI motivation with heterogeneity MSEs was analyzed in a static level.The results are as follows: compared with manufacturing enterprises, the productivitylevel of service enterprises is lower, but has strong productivity heterogeneity amongervice enterprises; the FDI motivation of MSEs is mainly market-seeking, whereasmanufacturing enterprises have increasingly pursued specialization across countries,but a higher motivation strength of efficiency-seeking among the MSEs; theproductivity levels of efficiency-seeking MSEs are higher than market-seeking MSEs,named the productivity premium is existed in FDI motivation of MSEs.Secondly, in order to explain the productivity premium of FDI motivation of MSEs in static level, the theoretical and empirical analyzes have been further taken inthis dissertation which based on the dynamic levels.In the theoretical analysis, the self-selection effect of FDI motivation ofheterogeneity MSEs was explained in an expand HMY model which introduced thefactors of FDI motivation and service characteristics, e.g. communicating costsbetween enterprises and consumers. And then, the learning effect of FDI motivationof heterogeneity MSEs was comparative static analyzed from the way of scaleeconomy effect, by building the function of differnet FDI motivations ofheterogeneity MSEs which reflects the relationship between the labor input andoutput. Under the assumption of CES preferences and iceberg trade costs, someinteresting theoretical expectations were drawn: the MSEs with higher productivitytend to seek efficiencies in the host country, the MSEs with lower productivity,however, product and provide service products in the host country; the aggregiateproductivity in a service secter would be promoted through the seclection effect andreallocation effect when the communicating costs was reducing; both market-seekingand efficiency-seeking of FDI motivations could improve their own productivity ofthe MSEs, but a higher learning effect exists in the MSEs whose motivation in thehost country is mainly efficiency-seeking.In the empirical analysis, in order to test the applicability of reality of the abovedtheoretical expectations, the indexes of level of industry and nation, which measurethe communicating costs with the comsumers, were respectively given based on theperspective of communicating level required in different work activities andcombined some specific factors, such as cultural, linguistic, institutional etc. And then,the empirical analysis that testing the above theoretical expectations were furtherrespectively given from the perpectives of the home and host countries. The resultsinclude: the selection effects of FDI motivation of the MSEs were significantlyexisted in the national level, namely the MSEs with higher productivity tend to seekefficiencies in the host country, however, there were no significant selection effectsexisted in the industrial level; the learning effects of FDI motivation of the MSEswere existed both in national level and industrial level, namely, the learning effect ofthe MSEs whose motivation is mainly efficiency-seeking was existed, which indicatethe MSEs could improve their own productivity when they seek the production and operating efficiency in the host market.Finally, comparing with the manufacturing multinationals, some findings aregiven in this dissertation: the communicating level and costs are much higher in theMSEs than in the manufacturing multinationals; the selection effects of FDImotivation of the manufacturing multinationals were significantly existed in thenational level, however, there were no significant selection effects existed in theindustrial level, which is the same with the analysis result of the MSEs; the learningeffects of FDI motivation of the manufacturing multinationals were non-existed bothin national level and industrial level, and only existed in the national level when theaggregiate data were taken, which indicate that the learning effect of FDI motivationof multinationals in the service sector is more significant than in the manufacturingsector.The above conclusions for a government and enterprises, especially for Chinawhich have the large scales both in FDI inflows and outflows, have great practicalsignificance. Such as: promting the production capacity and development level ofservices; the rapid development of trade in services; the policy in attracting FDIinflows services and promting service FDI outflows; the strategic choice of theservice enterprises “going out”.