Economics - Theses
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ItemForeign Direct Investment in Australia: determinants and consequences( 2005-12)Increased globalisation over the last two decades has led to strong growth of international business activity and FDI. Despite the considerable amount of research that has been undertaken to analyse the determinants and consequences of FDI, Australia represents a country with a substantial share of foreign ownership whose FDI experience has been largely overlooked in terms of a comprehensive economic analysis. Not only has Australia received a large amount of foreign investment so far, it is also competing for more FDI. Invest Australia, Australia’s national inward investment agency, is actively promoting Australia as a location for FDI, claiming that foreign investment has made a major contribution to Australia’s economic growth and living standards of all Australians. Instantly, two key issues arise. Firstly, assuming that FDI has positive effects, what causes the inflow of FDI, i.e. what are the determinants of FDI in Australia? Secondly, given the inflow of FDI, what is its actual effect on the Australian economy, i.e. what are the consequences of FDI in Australia? In order to analyse those questions, new and previously unused data on FDI inflows in Australia were explored by applying time-series and panel-data analysis. The time period ranges from 1981 to 2002, with differing coverage for the individual samples. A further contribution of the thesis is the search for new FDI data, bringing together and analysing datasets provided by the ABS and other statistical agencies (from the US, the UK, Japan and Germany). A detailed description of Australian FDI data was given to gain a better understanding of the Australian FDI experience and because no such comprehensive summary has been available. The first part of the analysis focused on the determinants of FDI. Determinants of FDI according to different theoretical models were discussed and tested using five types of datasets: aggregate quarterly data, country-specific annual data, industry-specific annual data, country- and industry-specific data (from the US, the UK, Japan and Germany and US) and US form-specific data. Australian FDI inflows were found to be driven by economic growth and market size, wages and labour supply (though the signs varied across models), trade and openness (though customs duties encouraged Japanese industry-specific FDI), interest rates, exchange rate appreciation, inflation rate (which had a unexpected positive effect) and the investing country’s overall FDI outflows. Corporate tax rates were only significant in the quarterly FDI model, but they had an unpredicted positive sign. Australian FDI was driven by longer term considerations and its determinants could not be fully explained by any single theory, but a variety of theoretical models. Furthermore investment decisions depend on factors such as investment origin, the industry in which the investment takes place and the form of the investment, making aggregation difficult. The second part of the analysis focused on consequences of FDI. Consequences of FDI according to different theoretical models were discussed and tested using two types of datasets: aggregate quarterly data and industry-specific annual data. FDI inflows had positive effects on economic growth and domestic investment, supporting the Australian government’s view that FDI is a favourable source of capital. However, the claim that FDI is favourable for Australia’s balance of payments position could not be supported by this analysis. FDI led to a reduction in export growth and no direct effect on import growth, though the effect of FDI on GDP growth led to increased import growth. Furthermore, industry-specific FDI in Australia had significant effects on employment growth (negative) and labour productivity growth (positive), while FDI growth had significant effects on real wage growth (negative) and industry concentration (positive). However, effects may differ depending on the FDI form, and Australia should focus more on attracting beneficial FDI (such as export-oriented or import-substituting FDI) rather than FDI in general.
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ItemThe internationalisation of Australian firms: how networks help bridge the psychic distance between a firm and a market( 2008)This research explores the internationalisation of Australian firms in Latin America. Latin America attracts seven per cent of worldwide inward foreign direct investment (FDI) stocks but accounts for less than one per cent of Australian FDI stocks abroad. This discrepancy led me to ask why and how some Australian firms have entered the region when most of those that have gone abroad went elsewhere. Drawing on constructs from the Uppsala model and the network perspective of internationalisation I created an integrated research framework that encompassed both the internal and the external drivers of internationalisation. I used a multiple case study research design based on in-depth interviews with ten firms to explore the mechanisms by which Australian firms overcome their perceived psychic distance to Latin America. I conducted interviews with key decision makers at both headquarters and subsidiaries in Australia, Brazil, Chile and Mexico. My findings demonstrate that firms simultaneously draw on internal and external resources to facilitate their internationalisation. By leveraging their networks firms are able to succeed in psychically distant markets despite an initial lack of experiential knowledge. My findings reveal that firms obtain market-specific knowledge vital for internationalisation via their networks. Internationalisation knowledge on the other hand is mainly acquired through first-hand, in-country experience. In this research I systematically document the types of institutional, business and social networks that impact internationalisation and categorise the numerous roles they fulfil. In addition to providing market-specific knowledge, network connections ‘unlock doors’, provide reassurance and comfort, provide credibility and help find employees, agents and local partners. Using networks to facilitate internationalisation accelerates the process in comparison to the traditional ‘trial and error’ method associated with in-country experiential learning. The integrated framework I develop provides a more holistic understanding of how firms internationalise than previous models. My research has implications beyond the Australia-Latin America context as an example of the increasing phenomenon of FDI from and to non-traditional markets.