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FOREIGN ENTRY INTO U.S. SERVICE INDUSTRY BY TAKEOVERS AND THE CREATION OF NEW FIRMS
Author(s) -
Feliciano Zadia M.,
Sun Jing
Publication year - 2016
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12121
Subject(s) - foreign direct investment , business , tertiary sector of the economy , comparative advantage , competitive advantage , service (business) , disadvantage , international trade , international economics , industrial organization , market economy , economics , marketing , political science , law , macroeconomics
We study the relation between foreign entry in U.S. service sector industries and the revealed comparative advantage of the investing country using U.S. Bureau of Economic Analysis firm‐level data on all foreign takeovers and new foreign‐owned firms from 1998 to 2008. We find foreign acquisitions in the service sector are in industries of U.S. comparative advantage while new foreign firms are in industries of investing country's comparative advantage. This suggests that foreign acquisitions in the service sector are not directly related to foreign investors' competitiveness in the industry of investment. In contrast foreign investors in new service sector firms come from countries with a competitive edge in the industries of investment. We also find that foreign investors of new service sector firms are from Organization for Economic Co‐operation and Development ( OECD ) countries with a comparative disadvantage in royalties and trademarks. ( JEL F21, F23, G34)