The production effect of FDI - A comparison between USA and the Nordic countries

Abstract

Foreign direct investment (FDI) is a cross-border investment made by entities from one country to another. The investment is important for both involved parties, contributing to technology, know-how and knowledge. The study aims to investigate whether FDI inflows affect the manufacturing production output in the receiving country, focusing on Sweden, Denmark, Finland and USA. The United States had during the investigated time period a higher FDI inflow value than Sweden, Finland and Denmark and a higher production level. The study also examine if other factors than FDI inflows are important for the production output. In the regression analysis made in the study, it is shown inward FDI into the economies are not significant as a contributing factor to higher production output. The small sample sizes included for FDI and production output, make it difficult in obtaining significant results. The control variables included are seen to be significant for some of the countries, indicating the United States not being very different from the Nordic countries according to its dependence of other factors than FDI to sustain a high production.