Outward Investments and Productivity: Evidence from European Regions

Abstract

Castellani D. and Pieri F. Outward investments and productivity: evidence from European regions, Regional Studies. Using a novel data set on international investment projects, this paper builds measures of outward foreign direct investments (FDIs) for 262 regions of the European Union. This allows as estimation to be made of regressions of productivity growth over the 2007–11 period as a function of the number of FDIs. The number of outward FDIs in manufacturing activities is negatively associated with productivity growth in the home region, but investments in sales, distribution and marketing are associated with a boost in local productivity. This is driven especially by investments towards non-European Union locations. This evidence qualifies the fear of hollowing-out as a consequence of outward investments.

Castellani D. and Pieri F. 对外投资与生产力：来自欧洲区域的证据，区域研究。本文运用国际投资计画的崭新数据集，建立欧盟二百六十二个区域的对外外商直接投资（FDIs）之计量。此一计量，得以让2007年至2011年期间的生产力成长的回归估计，作为FDIs数量的函数。在对外投资的区域中，製造业活动中的对外FDIs数量，与生产力的成长呈现负相关，但对于销售、分派和行销的投资，则与在地生产力的成长相关。此一现象，特别是受到对非欧盟地点的投资所驱动。此一证据证实了对外投资导致掏空的恐惧。

Castellani D. et Pieri F. L'investissement à l’étranger et la productivité: des résultats provenant des régions européennes, Regional Studies. Employant un ensemble de données original sur les projets d'investissement internationaux, cet article construit des mesures de l'investissement direct à l’étranger (IDE) auprès de 262 régions de l'Union européenne. Cela permet d’évaluer des régressions de la croissance de la productivité sur la période allant de 2007 jusqu’à 2011 en fonction du flux des IDE. Le montant des IDE dans le secteur industriel est associé négativement à la croissance de la productivité dans le pays d'origine, mais les investissements dans les ventes, la distribution et le marketing donnnent du tonus à la productivité locale. Cela est piloté notamment par des investissements à destination des pays situés à l'extérieur de l'Union européenne. Ces résultats expliquent la crainte que suscite le phénomène de hollowing out (à savoir, la polarisation de l'emploi) à cause des investissements à l’étranger.

Castellani D. und Pieri F. Auslandsinvestitionen und Produktivität: Belege aus europäischen Regionen, Regional Studies. Anhand eines neuartigen Datensatzes über internationale Investitionsprojekte werden in diesem Beitrag Maßstäbe der ausländischen Direktinvestitionen (ADI) für 262 Regionen der Europäischen Union entwickelt. Dies ermöglicht die Schätzung von Regressionen des Produktivitätswachstums im Zeitraum von 2007 bis 2011 als Funktion der Anzahl der ADI. Die Anzahl der ADI in produzierende Aktivitäten steht in einem negativen Zusammenhang mit dem Produktivitätswachstum in der Heimatregion, aber zugleich gehen Investitionen in Umsatz, Vertrieb und Marketing mit einem Anstieg der lokalen Produktivität einher. Ausschlaggebend hierfür sind vor allem Investitionen in Länder außerhalb der Europäischen Union. Diese Belege relativieren die Befürchtungen einer Aushöhlung aufgrund von Auslandsinvestitionen.

Castellani D. y Pieri F. Inversiones externas y productividad: evidencia de las regiones europeas, Regional Studies. A partir de un nuevo grupo de datos sobre los proyectos de inversión internacional, en este artículo desarrollamos las mediciones de inversiones directas extranjeras (IDE) hacia el exterior para 262 regiones de la Unión Europea. Esto nos permite hacer un cálculo de las regresiones del crecimiento de la productividad para el periodo de 2007 a 2011 como una función del número de IDE. El número de IDE hacia el exterior en las actividades de manufactura está negativamente asociado al crecimiento de la productividad en la región de origen, pero las inversiones en ventas, distribución y mercadotecnia se vinculan a la vez a un aumento en la productividad local. Esto está impulsado especialmente por las inversiones en países fuera de la Unión Europea. Esta evidencia mitiga el temor de una erosión debida a las inversiones hacia el exterior.

• Regional productivity growth
• Foreign investments
• Europe

• 区域生产力成长
• 外商投资
• 欧洲

• Croissance de la productivité régionale
• Investissements étrangers
• Europe

• Regionales Produktivitätswachstum
• Auslandsinvestitionen
• Europa

• Crecimiento de la productividad regional
• Inversiones extranjeras
• Europa

JEL classifications:

• C23
• F23
• O47
• R11

Acknowledgements

This paper is a substantially revised version of a version that appeared previously as ‘Foreign Investments and Productivity. Evidence from European Regions’, Quaderni del Dipartimento di Economia, Finanza e Statistica no. 83 (2011). The authors wish to thank two anonymous referees for their useful remarks made on a previous version of the paper. The usual disclaimer applies.

SUPPLEMENTAL DATA

Supplemental data for this article can be accessed at http://dx.doi.org/10.1080/00343404.2014.981149

ORCID

Fabio Pieri http://orcid.org/0000-0003-2035-4060

Notes

1. In fact, 45% of the EU budget for the period 2007–13 was allocated to foster competitiveness and promote social and economic cohesion among the regions of its member states.

2. See, for example, the empirical evidence provided by Paci and Usai (2000), Ciccone (2002), and Bronzini and Piselli (2009).

3. As for the effect of FDI spillovers, see Driffield (2004), Girma and Wakelin (2007), Driffield et al. (2010) for some evidence on UK regions; Mullen and Williams (2007) on US states; Altomonte and Colantone (2009) on Romania; Halpern and Murakozy (2007) on Hungary, Crespo et al. (2009) on Portugal; and Hamida (2013) on Switzerland.

4. In fact, Gambardella et al. (2008) introduce a generic measure of openness using the share of hotels in the population and the share of the population that speaks a second language. Instead, Boschma and Iammarino (2009) exploit the rare availability of import and export data at the NUTS-3 level made available by the Italian National Statistical Office.

5. NUTS is an acronym for Nomenclature of Units for Territorial Statistics, which indicates a hierarchical classification of administrative areas used by the European statistical office (Eurostat). NUTS levels (1–3) indicate different degrees of aggregation.

6. The database used herein does not include information on Croatia, which joined the EU on 1 July 2013.

7. For example, outward FDIs as a share of GDP range from values close to zero in most NMS to around 1% in countries such as Italy and Greece and to more than 5% in the UK, France and Spain.

8. In fact, as revealed in the correlation matrix contained in Appendix A, these variables show similar correlation coefficients with and .

9. See, among others, the review of the literature in Barba Navaretti and Venables (2004) and Castellani and Zanfei (2006), and note 2 above for empirical studies at the regional level.

10. Cross-refer with Appendix A for further information on how control variables included in the analysis were built.

11. See Eurostat at: http://epp.eurostat.ec.europa.eu/portal/page/portal/region_cities/.

12. See http://europa.eu/legislation_summaries/regional_policy/.

13. A team of in-house analysts searches daily for investment projects from various publicly available information sources, including Financial Times newswires, nearly 9000 media, over 1000 industry organizations and investment agencies, and data purchased from market research and publication companies. Each project identified is cross-referenced against multiple sources, and over 90% of projects are validated with company sources. For more information, see: http://FDImarkets.com/.

14. Member countries in the EU prior to 1 May 2004 were: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the UK.

15. Bulgaria, the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia.

16. Careful inspection of Table 1 reveals that the number of projects is a better proxy of the number of outward than of inward flows, given the higher correlation coefficient: inward investment flows are overestimated in some NMS, such as Poland, Romania, Hungary, Bulgaria and the Czech Republic, probably due to the fact that these countries received a large number of projects of relatively small scale.

17. Sales includes three closely related types of activities: sales, retail, and marketing and support activities.

18. The category ‘other’ gathers the following business activities: headquarters, business services, R&D, other production activities, and other service activities.

19. The remarkable labour productivity growth experienced by Spanish regions occurred in the context of large employment losses after 2007 (in the present database employment losses amounted to a –2.9% employment growth rate each year from 2007 to 2011, in contrast to an average rate of employment losses equal to −0.05% in the EU-15 – without Spain – each year), triggered by the global economic crisis and the burst of the real-estate bubble, as evidenced by other works (e.g., Sanguinetti and Fuentes, 2012, among others).

20. The three employment shares were also entered one by one in the baseline specification, and the results, which are available from the authors upon request, are stable. A finer classification of the service sectors is available from Cambridge Econometrics, but this would only increase multicollinearity problems, without adding much information. Unfortunately, more disaggregated information for manufacturing industries is not available. Results using finer sectoral disaggregation are available from the authors upon request.

21. For an interesting example of the micro-foundation of regional productivity dynamics, see Altomonte and Colantone (2009). However, this study is limited to one country (Romania) and focuses only on the contribution of inward FDIs.

22. More formally, since:where , one can write the elasticity of y with respect to as:Inter alia, one could compute the absolute change in labour productivity growth associate with a percentage increase in as .

23. In fact, Pearson's correlation coefficient between investments within the EU and outside it is close to 0.9 (see the correlation matrix in Appendix A).

Additional information

Funding

Financial support from the Italian Ministry of University and Research [PRIN 2009 Project on ‘Production, R&D and Knowledge Offshoring: Economic Analyses and Implications for Italy’] (to Davide Castellani) and the Spanish Ministry of Science and Innovation [project number MINECO ECO2011-27619, co-financed with FEDER] (to Fabio Pieri) is greatly acknowledged.