Market structure and the relationship between foreign direct investment and exports

This dissertation seeks to fill a gap in the literature that addresses the relationship between foreign direct investment (FDI) and exports. Specifically, it examines if the relationship between FDI and exports varies across various degrees of industry competition. Using 1997 and 2002 data for the U.S. manufacturing industries at the five-digit NAICS, the empirical model uses the United States as the host market for the major investing countries. Different empirical estimations, which are based on the gravity model, suggest that FDI and exports tend to complement each other in competitive industries and substitute for each other in industries where the level of competition is low. To assess the robustness of that result, the industries are subdivided into producer-goods, consumer-goods, and mixed-goods categories. While the producer-goods category and, to a lesser extent, the mixed-goods category strengthen the earlier result, no conclusion can be drawn for the consumer-goods category.