Trade linkages of inward and outward FDI: Evidence from Malaysia

Goh, Soo Khoon and Wong, Koi Nyen * and Tham, Siew Yean (2013) Trade linkages of inward and outward FDI: Evidence from Malaysia. Economic Modelling, 35. pp. 224-230. ISSN 0264-9993

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Abstract

Developing and transition economies are an increasingly important source of outward foreign direct investment (OFDI). The objective of this paper is to fill the gap in the literature regarding outward foreign direct investment by adopting the well known gravity model to examine the relationship between trade (export and import), inward and outward FDI using Malaysia as a case. This contributes to the literature as previous studies on OFDI in Malaysia have focused primarily on the determinants of these outward flows, and there are no studies examining the impact of OFDI on trade. Based on Hausman-Taylor estimation method, our findings reveal that inward foreign direct investment (IFDI) conforms to the observed pattern of a complementary relationship between FDI and trade, while OFDI and trade linkages are not significant as OFDI is dominated by the services sector, which generally is non-tradable. However, intra-firm trade in services could be increased through the process of fragmentation or outsourcing.

Item Type: Article
Additional Information: First author affiliated with the Centre for Policy Research and International Studies, Universiti Sains Malaysia;2nd author with Sunway University Business School; 3rd author with Institute of Malaysian and International Studies, Universiti Kebangsaan Malaysia
Uncontrolled Keywords: Outward FDI; trade; multinationals; Malaysia
Subjects: H Social Sciences > HF Commerce
Divisions: Others > Non Sunway Academics
Sunway University > Sunway University Business School > Dept. Management and Economics
Depositing User: Ms. Molly Chuah
Date Deposited: 21 Jan 2014 10:22
Last Modified: 21 Jan 2014 10:22
URI: http://eprints.sunway.edu.my/id/eprint/217

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