Trade linkages of inward and outward FDI

Evidence from Malaysia

Soo Khoon Goh, Koi Nyen Wong, Siew Yean Tham

Research output: Contribution to journalArticle

19 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)224-230
Number of pages7
JournalEconomic Modelling
Volume35
DOIs
Publication statusPublished - Sep 2013

Fingerprint

Outward FDI
Outward foreign direct investment
Malaysia
Trade linkages
Developing economies
Intra-firm trade
Transition economies
Outsourcing
Gravity model
Service sector
Foreign direct investment
Import
Fragmentation
Trade in services

Keywords

  • F21
  • Malaysia
  • Multinationals
  • Outward FDI
  • Trade

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Trade linkages of inward and outward FDI : Evidence from Malaysia. / Goh, Soo Khoon; Wong, Koi Nyen; Tham, Siew Yean.

In: Economic Modelling, Vol. 35, 09.2013, p. 224-230.

Research output: Contribution to journalArticle

Goh, Soo Khoon ; Wong, Koi Nyen ; Tham, Siew Yean. / Trade linkages of inward and outward FDI : Evidence from Malaysia. In: Economic Modelling. 2013 ; Vol. 35. pp. 224-230.
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