| This dissertation studies how the evolution of information technology could facilitate bilateral FDI activities, the channels for international R&D spillovers, and which exchange rates matter for FDI.;Applying an IT-augmented gravity specification to bilateral FDI data from 1980 to 1997, the first chapter finds that distance is an important impediment to bilateral FDI. The joint development of IT in the home and host countries encourages FDI by saving communication costs. IT has greater impact on FDI activities from G7 countries to OECD countries, compared to non-OECD countries. In addition, it suggests that IT encourages more FDI by reducing the perceived distance in the 1990s than that in the 1980s. When the distance between two countries is beyond a threshold range, the home country might be motivated to outsource through arm's length contract to countries with well-established IT infrastructure.;With the rapid pace of economic integration, the productivity growth in a country depends on both its own R&D and foreign R&D. The second chapter examines three channels of international R&D spillovers: trade, FDI and information technology. Using panel cointegration analysis, this research finds that trade remains an important conduit for international R&D spillovers. Although bilateral FDI is found to be positively related to R&D spillovers, their impact on productivity growth is relatively small at the national level. It shows that the development of IT has played a more important role in international R&D spillovers in recent years.;While theory suggests that exchange rate behavior has different implications for FDI depending on the type of FDI, empirical work suffers greatly from the aggregate nature of available FDI data. Using disaggregated Japanese FDI data, the third chapter studies how different measures of exchange rate are empirically related to FDI flows. It is found that the widely used bilateral exchange rate volatility does not have explanatory power on FDI decisions. Industry-specific competitor-weighted exchange rate outperforms other exchange rate measures. Industry level analysis provides evidence that high exchange rate volatility decreases FDI share in electrical and farming and forestry sectors, while raising FDI in the textile and transport sectors. |
