State Based Determinants of Inward FDI Flow in the US Economy

Lucyna Kornecki, EM. Ekanayake

Department of Business Administration, Bethune-Cookman University, School of Business Daytona Beach.
Department of Economics, Finance, and Information Systems, Embry-Riddle Aeronautical University, College of Business Daytona Beach.

DOI: 10.4236/me.2012.33040                

Abstract

Inward foreign direct investment (FDI) represents an integral part of the U.S. economy. The flow of international capital has been a key factor expanding economy. The inward U.S. FDI constitutes important factor contributing to output growth in the U.S. economy. This paper investigates factors affecting the inward FDI flow among fifty states of the United States. The analysis uses annual data for the period from 1997 to 2007. The study identifies several state-specific determinants of FDI and investigates the changes in their importance during the study period. Our results show that among the major determinants, the real per capita income, real per capita expenditure on education, FDI related employment, research and development expenditure, and capital expenditure are found to have a significant positive impact on FDI inflows. There is also evidence that the share of scientists and engineers in the workforce exerts a small positive impact on inward FDI flow. In addition, per capita state taxes, unit labor cost, manufacturing density, unionizetion, and unemployment rate exert a negative impact on FDI inflows.

Keywords

Inward FDI Flow; State Based Determinants; U.S. Economy

Conflicts of Interest

The authors declare no conflicts of interest.

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