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Current Research
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Mailing
Address:
Department of Economics
Western Michigan University
1903 W. Michigan Ave.
Kalamazoo, MI 49008 USA
PH: 1.269.387.5545
FAX:1.269.387.5637
EMAIL:michael.ryan@wmich.edu
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Abstracts of Current Research & Work in Progress
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* Exchange Rate Effects on Complex FDI:
Theory and Evidence (w/ H. Egger & P. Egger) We set up
a three-country model of export-platformmultinationals and
exporters that engage in Cournot competition. In this model, we
study the effects of exchange rate appreciation. Thereby, we put
special emphasis on the role of third-country effects for
multinational activities. In particular, we are interested in the
impact of exchange rate appreciation on foreign direct investment
(FDI) and foreign affliate sales (FAS). Based on the theoretical
insights, we investigate the third-market effects of exchange rate
appreciation for foreign MNE activities of the U.S. and Japan. To
accomplish this task, we adopt an econometric approach that
explicitly allows us to model cross-sectional dependence at the
international level and to estimate the parameters of interest by
generalized method of moments.
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*Firm Productivity and the
Foreign-Market Entry Decision (w/ H. Raff & F.Stähler) We
use Japanese firm-level data to examine how a firm’s
productivity affects its choice of foreign-market entry strategy. We
study a sequence of decisions, starting with the choice between
exporting and foreign direct investment (FDI). In the case of FDI,
the firm faces two options: greenfield investment or merger and
acquisition (M&A). If it selects greenfield investment, it has
two ownership choices: whole ownership or a joint venture.
Controlling for industry- and country-specific characteristics, we
find that the more productive a firm is, the more likely it is to
choose FDI rather than exporting, greenfield investment rather than
M&A, and whole ownership rather than a joint venture. We also
find that the assumed sequence of decisions fits the data better
than alternative specifications.
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*FDI Location and Size. Does Employment
Protection Legislation Matter? (w/ D.M. Gross)- This paper
investigates the effect of employment protection legislations
(EPLs) for regular and temporary employment on Japanese firm-level
FDI into 15 Western European countries during two periods (late
1980s, late 1990s). We find that employment protection does matter
in the location choice of Japanese investors and it has an adverse
effect on the employment-size of FDI. There is a clear direct
impact from legislation on regular employment on almost all
economic sectors and yet few countries relaxed their legislation
during the period. Increased flexibility occurred mostly through a
lowering of temporary employment protection, which led to
substitution of types of workers with overall adverse effect on
employment.
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*Foreign Investment History and Location
in FDI Heterogeneity Studies. (w/ J. Kukulski).We
examine the robustness of previous stochastic dominance tests that
find significant total factor productivity (TFP) heterogeneity
between firms that remain domestic, those that export abroad, and
those that become multinationals (MNEs). Significant
“within-group” TFP heterogeneity is found for the MNEs
based on investment number and affiliate geographic location. As a
result, the exporter-MNE “between-group” TFP
relationship depends upon the composition of firms within the MNE
group. Thus, the standard three-tiered hierarchical TFP-market
orientation relationship inadequately captures true heterogeneity
between firm types.
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*Firm-specific Characteristics and the
Decision to Invest Abroad (w/ H. Raff)- The FDI literature
emphasizes how firm-specific characteristics affect a firm’s
investment likelihood. Left unexamined is how the influence of
these characteristics changes over the firm’s entire
investment history. For firm-level Japanese FDI into Europe between
1970-1994, a proportional hazard model is used to examine the
determinants of a firm’s initial and subsequent
investment(s). Firm-specific characteristics such as firm size,
R&D intensity, export sales, and keiretsu membership are shown
to have different effects at each stage of the investment process.
Thus, past investment history plays an important role in
understanding the limitations in generalizing the effects of FDI
determinants over firms' entire investment histories.
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*Manufacturing MNEs and Foreign Direct
Investment in Services This paper investigates foreign
direct investment (FDI) by manufacturing multinational enterprises
(MNEs) into service-industry affiliates. Using firm-level Japanese
FDI data on investment into Europe from 1970-2000, characterization
of the timing, location choice, and ownership traits of these
service affiliates can be made. A determination of how previous
manufacturing FDI experience and industry affiliation affects
service FDI characteristics is possible, as is a comparison to
service FDI from service MNEs. Finally, country-specific data,
including data on local ownership regulations, is used to determine
the degree to which host-county characteristics affect decisions on
affiliate ownership and joint-venture partners for service FDI.
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