Bericht
How Does Foreign Direct Investment Measure Real Investment by Foreign-owned Companies? Firm-level Analysis
We study how Foreign Direct Investment (FDI) measures gross fixed capital formation in foreign-owned companies. Our data include firm-level information on FDI inflows and real investment (Gross Fixed Capital Formation) by foreign-owned companies located in Finland. Our results suggest that the recorded annual inflows of FDI poorly measure annual real investments in foreign-owned companies. Since the beginning of the global recession in 2008, FDI has significantly underestimated real investments by foreign companies in Finland. We seek to explain these findings by describing Finnish FDI target enterprises and subgroups and the nature of their FDI flows from several perspectives. We show how FDI target enterprises use other sources of funding in addition to FDI, and how a few large transactions, often related to cross-border mergers and acquisitions, can explain a great deal of the recorded annual FDI flows. We also describe how Finland’s FDI figures increasingly consist of funds that merely pass through the FDI enterprises and subgroups, arguably with little or no real economic linkage to the Finnish economy, and present a calculation method for estimating such pass-through funding.
- Language
-
Englisch
- Bibliographic citation
-
Series: ETLA Report ; No. 27
- Classification
-
Wirtschaft
International Investment; Long-term Capital Movements
Multinational Firms; International Business
Investment; Capital; Intangible Capital; Capacity
- Subject
-
Foreign direct investment
Fixed investment
GFCF
Measure
Measurement
Passthrough
Inward
Firm-level
- Event
-
Geistige Schöpfung
- (who)
-
Leino, Topias
Ali-Yrkkö, Jyrki
- Event
-
Veröffentlichung
- (who)
-
The Research Institute of the Finnish Economy (ETLA)
- (where)
-
Helsinki
- (when)
-
2014
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Bericht
Associated
- Leino, Topias
- Ali-Yrkkö, Jyrki
- The Research Institute of the Finnish Economy (ETLA)
Time of origin
- 2014
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