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A race to lower standards? Labor standards and location choice of outward FDI from the BRIC countries

Duanmu, J-L (2014) A race to lower standards? Labor standards and location choice of outward FDI from the BRIC countries International Business Review, 23 (3). pp. 620-634.

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Abstract

Scholars argue that multinational corporations tend to locate their investment in countries with lower labor standards, but empirical results are highly inconsistent. In this paper, we investigate the effect of differential labor standards on the location choice of outward greenfield foreign direct investment (FDI) from Brazil, Russia, India and China (i.e. the BRIC countries). We find robust evidence that while there is a tendency toward the attraction of FDI by lower labor standards in developed countries, such a "race" is absent in FDI directed to developing countries. Location choice is highly path dependent upon previous trading relations between the home and the host country, which hampers the MNCs' ability to arbitrage. Conversely, capital mobility at the industry level is found to intensify the race to lower standards. © 2013 Elsevier Ltd.

Item Type: Article
Subjects : Economics
Divisions : Faculty of Arts and Social Sciences > Surrey Business School
Authors :
AuthorsEmailORCID
Duanmu, J-LUNSPECIFIEDUNSPECIFIED
Date : June 2014
Identification Number : 10.1016/j.ibusrev.2013.10.004
Copyright Disclaimer : © 2014. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Uncontrolled Keywords : BRIC countries, Labour standards, Greenfield foreign direct investment
Additional Information : NOTICE: this is the author’s version of a work that was accepted for publication in International Business Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Business Review, 23(3), June 2014, DOI 10.1016/j.ibusrev.2013.10.004.
Depositing User : Symplectic Elements
Date Deposited : 02 Dec 2014 13:44
Last Modified : 28 Jul 2016 10:22
URI: http://epubs.surrey.ac.uk/id/eprint/806761

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