Export-oriented foreign direct investment in East Asia and Latin America: Determinants of location

Most research on foreign direct investment (FDI) has been devoted to understanding market-oriented production. Export-oriented foreign direct investment and production sharing has received less attention. Yet, export-oriented policies in developing countries may accelerate economic growth and may serve as an important engine of economic growth. Developing countries with favorable export growth have achieved significant economic expansion. Thus, developing countries have moved away from protection of domestic market-oriented industry and toward export-oriented growth.;This dissertation compares export-oriented production in East Asian countries and Latin American countries to stimulate their economic growth. East Asian countries have achieved economic growth and industrial development with export-oriented production policies. Latin American countries which adopted import substitution policies, on the other hand, have not achieved the same degree of success as East Asian countries.;The important role of the textile industry in the economic development is also discussed. U.S. textile manufacturers have taken advantages of low-cost labor in developing countries and shifted their focus to these countries as a site for export-oriented production. This dissertation examines what determines the location of export-oriented foreign production.;In order for host countries to attract export-oriented foreign direct investment, they must have favorable underlying economic conditions and government policies. In this study, nine variables were chosen as the location determinants of offshore production: per capita GDP, political stability, wage rate, exchange rate devaluation, distance, free trade zone (FTZ), liberalization, and inflation rate. This dissertation tests whether these variables determine the location of offshore production with the data on production sharing for the U.S. textile industry and gross product of the U.S. nonbank foreign affiliates. The results show that FTZ, per capita GDP, liberalization, distance, and exchange rate devaluation are effective on the determination of location for export-oriented FDI. In particular, liberalization has an important role in determining location. Open economies appear to do best in economic growth and in attracting export-oriented FDI. This supports trends toward openness in world markets in the 1990s.