FUTURE RESEARCH DIRECTIONS
Our findings indicate the importance of selected variables in evaluating the effects of FDI flow on US states employment. Also, they emphasize the need for US to selectively target FDI in specific states and industries and make a host government’s aware of importance of promotional effort to attract foreign direct investment and stimulate employment and growth at the state level contributing to overall output growth and employment in the US economy.
Encouraging more FDI and expanding the number of countries investing in the United States can lead potentially to higher employment and higher output growth.The recent economic crises negatively impacted world FDI flows in 2008 and 2009 and opened a period of major uncertainty. IFDI flows into the United States fell in 2009 but rose in 2010 and 2011, recovering toward the pre-crisis level, but remaining well below their pre-crisis peak. The effectiveness of government policy responses at both the national and international levels in addressing the financial crisis and its economic aftermath will play a crucial role for creating favorable conditions for a continued recovery of FDI inflows into the United States. Public policies will obviously play a major role in the implementation of favorable conditions for such a recovery. Structural reforms aimed at ensuring more stability in the world financial system, a renewed commitment to an open environment for FDI and the implementation of policies aimed at favoring investment and innovation are key issues in this respect (UNCTAD, 2009).
Solutions and Recommendations
IFDI represents an integral part of the US economy, with its stock growing from US$ 83 billion in 1980 to US$ 3.5 trillion in 2011. The United States, which had earlier been primarily a home for multinational enterprises (MNEs) rather than a host for affiliates of foreign MNEs, has become a preferred host country for FDI since the 1980s.
Foreign MNEs have contributed robust flows of FDI into diverse industries of the US economy, and total FDI inflows reached US$ 227 billion in 2011, equivalent to 15% of global inflows, the single largest share of any economy. US FDI flows, with a peak of US$ 314 billion in 2000 and another of US$ 306 billion in 2008, have been an important factor contributing to sustained economic growth in the United States.The recent financial and economic crises negatively impacted FDI flows to the United States and opened a period of major uncertainty. The effectiveness of government policy responses at both the national and international levels in addressing the financial crisis and its economic consequences will play a crucial role for creating favorable conditions for a rebound in FDI inflows.
Unlocking the full potential of the future global inward FDI developments for the United States, as elsewhere, will depend on wise policymaking and institution building by governments and international organizations.
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KEY TERMS AND DEFINITIONS
Foreign Direct Investment (FDI) Financial Structure: Equity capital, reinvested earnings, intercompany debts. Equity capital is the foreign direct investor’s purchase of shares of an enterprise in a country other than its own. Reinvested earnings comprise the direct investor’s share (in proportion to direct equity participation) of earnings not distributed as dividends by affiliates, or earnings not remitted to the direct investor.
Such retained profits by affiliates are reinvested intercompany debts. Intra company loans or intra company debt transactions refer to short or long term borrowing and lending of funds between direct investors (parent enterprises) and affiliate enterprises.Foreign Direct Investment (FDI) Flow: The FDI inflow measures the amount of FDI entering a country during a one year period. FDI refers to an investment made to acquire lasting interest in enterprises operating outside of the economy of the investor. The investor’s purpose is to gain an effective voice in the management of the enterprise. FDI refers to an investment made to acquire lasting interest in enterprises operating outside of the economy of the investor. A threshold of 10 per cent of equity ownership qualifies an investor as a foreign direct investor, having an effective voice in the management of an enterprise FDI may be undertaken by individuals as well as business entities. (www.unctad.org/Templates/Page. asp?intItemID=3146&lang=1).
Foreign Direct Investment (FDI) Stock: The FDI stock represents the total amount of productive capacity owned by foreigners in the host country. FDI stock grows over time and includes all retained earnings of foreign-owned firms held in cash and investments.
Greenfield Investments: A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees (http://en.wikipedia.org/wiki/Green- field_project#Greenfield_investment.
Inward Foreign Direct Investment (IFDI): Inward operations refer to the activities of foreign affiliates in the host economy (business enterprises in which there is an FDI relationship in the host country) (http://unctad.org/en/Docs/ wir2007p4_en.pdfI)
Mergers and Acquisitions (M&A): Refers to the consolidation of companies.
A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed. Cross-border M&A statistics include mergers and acquisitions between foreign affiliates and firms located in the same host economy.This work was previously published in Globalization and Governance in the International Political Economy, edited by Umit Hacioglu and Hasan Dinςer, pages 85-103, copyright 2014 by Information Science Reference (an imprint of IGI Global).
APPENDIX: WEB SITES
The 2012 A.T. Kearney FDI Confidence Index, (http://www.atkearney.com/index.php/ Publications/foreign-direct-investment-confidence-index.html)
National Science Foundation, Division of Science Resources Statistics, Science and Engineering Indicators, (http://www.nsf.gov/statistics/seind10/).
The US Census Bureau, (http://www.census.gov).
The US Department of Commerce, Bureau of Economic Analysis (BEA), (http://www.bea.gov).
The US Department of Commerce, Bureau of Economic Analysis, FDI database, (www.bea.gov/ international)
The US Department of Commerce. Annual Survey of State Government Finances, (http://www. census.gov/govs/state/).
The US Department of Labor, Bureau of Labor Statistics, (http://www.bls.gov)
Union Membership and Coverage Database from the CPS, (http://www.unionstats.com)
Location USA- Area Development, (http://www.areadevelopment.com/LocationUSA/)
United Nations Conference on Trade and Development (UNCTAD), Assessing the impact of current financial and economic crisis on global FDI flows, January 2009 (https://wpqr1.adb.org/.../0 918BE1C4C9148EC48257567000D8869/...)
The Organization for International Investment & RSM McGladrey, (http://www.ofii.org/resources) Bureau of Economic Analysis, Comprehensive Financial and Operating Data Archive by Industry of Affiliate, (Tables F7 & G7), (http://www.bea.gov/international/di1fdiop.htm)
Thomson ONE Banker, Thomson Reuters (2011), (http://banker.thomsonone.com/)
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